Question

Question Help Fidelity Stereo Company has provided the following information regarding its activity-based costing system: *Purchasing department costs are allocated based on purchase orders, and the predetermined overhead allocation rate is $77 per purchase order *Assembly department costs are allocated based on the number of parts used, and the predetermined overhead allocation rate is $2 per part. *Packaging department costs are allocated based on the number of units produced, and the predetermined overhead allocation rate is 54 per unit produced Each stereo produced has 50 parts, and the direct materials cost per unit is $68. There are no direct labor costs. Fidelity Stereo has an order for 1.000 stereos, will require 45 purchase orders in all. What is the total cost for the 1,000 stereos? O A. S107,060 OB. $175,465 OC. $172,000 D. S103,465 Click to select your answer

Answer 1

Answer :

Correct answer is option B = $ 175,465

calculation:

Total cost for 1,000 stereos
		Per unit cost (a)	no. of units (b)	total cost (a * b )
Direct material Cost		$ 68	1,000	68,000
Direct labour cost				0
Overhead Cost	( Working note see below )			107,465
				175,465.00
Total overhead cost
	Basis of allocation	Per unit cost (a)	No. of units (b)	Total cost (a * b )
Purchasing department cost	Purchase orders	$ 77 per order	45 purchase orders	3,465
Assembly department cost	number of parts used	$ 2 per part	50,000 parts	100,000
			( 50 part per unit x 1,000 units )
packaging department cost	no. of units produced	$ 4 per unit produced	1,000 units	4,000
				107,465

Dear Student, Please upvote the answer. Thankyou.