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XAG-B company is reviewing the behavior of its various activities. XAG is currently the company uses a plant-wide rate for allocating manufacturing overhead.
The plant manager believes it is time to refine the method of cost allocation and has the accounting department identify the primary production activities and their cost drivers: Activities Cost driver Allocation Rate Material handling Number of parts $2 per part Assembly Labor hours $20 per hour Inspection Time at inspection station $3 per minute The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $200 per labor hour.
Problem 1: What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts, 6 direct manufacturing labor hours, and 2.5 minutes of inspection time.
Select one:
a. $4.00 per remote controlb. $24.00 per remote controlc. $6.55 per remote controld. $327.50 per remote control
Cost structures will not change, compute the percentage and dollar amount of the change in operating income for each company.
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BX company underestimated the manufacturing overhead budget and underestimates the activity base for the year, what is the result?
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