Question

Mouse uses activity-based costing. Two of Mouse's production activities are kitting (assembling the raw materials needed for each computer in one kit) and boring the completed products for shipment to customers. Assume that Mouse spends $5,500,000 per month on kitting and $14,000,000 per month on boxing (Click the icon to view allocation information.) (Click the icon for additional information) If a desktop now uses 175 parts, what is the new kitting cost assigned to one desktop? (Round all i More Info i More Info O A $14.00 OB. $20.00 OC. $8.75 OD. $12.50 Mouse 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 Mouse estimates it will use 110,000,000 parts per month and ship products with a total volume of 28,000,000 cubie feet per month. Assume that each desktop computer requires 250 parts and has a volume of cubic feet. The predetermined overhead allocation rate for ting is $0.05 per part and the predetermined overhead allocation rate for boxing is $0.50 por cubic foot. The kitting and boxing costs assigned to one computer are $12.50 and $4.00, respectively, Mouse contracts with its suppliers to pre-kit certain component parts before delivering them to Mouse Assume this saves $1,500,000 of the king cost and reduces the total number of parts by 60,000,000 (because Mouse considers euch pre ktas one part) Print Done Print Done Click to select your answer.

Answer 1

Predetermined Overhead Rate of Kitting = $0.05

Total Kitting cost per desktop computer is (175 parts * $0.05) = $8.75

option C is the correct answer