Question

Miramar Industries manufactures two products: A and B. The manufacturing operation involves three overhead activities—production setup, materials handling, and general factory activities. Miramar uses activity-based costing to allocate overhead to products. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities: Activity Cost Activity Base Production setup $250,000 Number of setups Material handling 150,000 Number of parts General overhead 80,000 Number of direct labor hours Each product's total activity in each of the three areas are as follows: Product A Product B Number of setups 100 300 Number of parts 40,000 20,000 Number of direct labor hours 8,000 12,000 What is the activity rate for materials handling?

a.$2.50 per part

b.$7.50 per part

c.$3.75 per part

d.$1.50 per part

Answer 1

Answer : a. $2.50 per part

Calculated as

                                     Product A     Product B    Total

Number of parts                         40,000          20,000 = 60000

Material handling cost per setup =   $150000

Material handling cost rate = Total material handling cost/Number of parts

= $150000/60000 = $2.50 per part

Thanks a lot

Kindly hit thumbs up if satisfied

For any query mention in comment section please