Question

Pell uses activity-based costing. Two of Pell'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 Pell spends $9,000,000 per month on kitting and $13,000,000 per month on boxing. Pell 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 Pell estimates it will use 300,000,000 parts per month and ship products with a total volume of 20,000,000 cubic feet per month. Assume that each desktop computer requires 125 parts and has a volume of 13 cubic feet. What are the predetermined overhead allocation rates? (Round all calculations to the nearest cent.) Kitting Boxing $0.03 per part $0.04 per cubic foot $0.45 per part $0.04 per cubic foot Oc. $33.33 per part $1.54 per cubic foot OD. $0.03 per part $0.65 per cubic foot

Answer 1

Predetermined Overhead rate = Estimated overhead/Estimated allocation base

Kitting = 9,000,000/300,000,000 = 0.03

Boxing = 13,000,000/20,000,000 = 0.065

Option D is the answer