Question

Keyboard uses​ activity-based costing. Two of Keyboard​'s production activities are kitting ​(assembling the raw materials needed for each computer in one​ kit) and boxing the completed products for shipment to customers. Assume that Keyboard spends $9,000,000 per month on kitting and $21,000,000 per month on boxing. Keyboard allocates the​ following:

Kitting costs based on the number of parts used in the computer

Boxing costs based on the cubic feet of space the computer requires

Suppose Keyboard estimates it will use 300,000,000 parts per month and ship products with a total volume of 35,000,000 cubic feet per month. Assume that each desktop computer requires 175 parts and has a volume of 5 cubic feet. The predetermined overhead allocation rate for kitting is $0.03 per part and the predetermined overhead allocation rate for boxing is ​$0.60 per cubic foot.

What are the kitting and boxing costs assigned to one desktop​computer?

Answer 1

$5.25 per desktop computer and $3 per desktop computer

Step-by-step explanation:

The computation of the assigned cost to the kitting and boxing costs is shown below:

The formula is

= Predetermined overhead rate × required units

For kitting, it is

= $0.03 × 175 parts

= $5.25 per desktop computer

For boxing, it is

= $0.60 × 5 cubic feet

= $3 per desktop computer

We simply applied the above formulas