Question

Nichols Inc. manufactures remote controls. Currently the company uses a plantminuswide rate for allocating manufacturing overhead. The plant manager is considering switchingminusover to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as​ follows: Activities Cost driver Allocation Rate Material handling Number of parts ​$5 per part Assembly Labor hours ​$20 per hour Inspection Time at inspection station ​$10 per minute The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of​ $20 per labor hour. What are the indirect manufacturing costs per remote control assuming an activityminusbasedminuscosting method is used and a batch of 10 remote controls are​ produced? The batch requires 100​ parts, 5 direct manufacturing labor​ hours, and 3 minutes of inspection time. A. ​$630.00 per remote control B. ​$35.00 per remote control C. ​$63.00 per remote control D. ​$2.00 per remote control

Answer 1

C. ​$63.00 per remote control

Step-by-step explanation:

As for the details in question,

Material Handling = $5 per part

Assembly = $20 per hour

Inspection = $10 per minute

Actual activity and cost thereof for remotes produced

Material handling = $5
`*` 100 parts = $500

Assembly = $20
`*` 5 direct labor hours = $100

Inspection = $10
`*` 3 minutes = $30

Total overheads = $630

Total remotes manufactured = 10

Cost per remote = $630/10 = $63

C. ​$63.00 per remote control