Question

Question Help Tranquility Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct materials cost is $75 and each ceiling fan requires 4 hours of machine time to manufacture. There is no direct labor. Additional information is as follows: Predetermined Overhead Activity Allocation Base Allocation Rate Materials handling Number of parts $ 0.04 Machining Machine hours 68 Assembling Number of parts 0.25 Packaging Number of finished units 3.2 What is the total manufacturing cost per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.) O A. S108.00 O B. $111.20 C. 584.00 OD. $103.00

Answer 1

Solution :

Calculation of overhead cost per unit of ceiling fan :

Sl.No.	Activity (1)	Allocation base (2)	Allocation base in units (3)	Predetermined overhead allocation rate (4)	Overhead cost for the activity (5) = (3) * ( 4 )
1	Materials handling	Number of parts	20	$ 0.04	$ 0.8
2	Machining	Machine hours	4	$ 6.8	$ 27.2
3	Assembling	Number of parts	20	$ 0.25	$ 5
4	Packaging	Number of finished parts	1	$ 3.2	$ 3.2
5	Total overhead costs = $ 0.8 + $ 27.2 + $ 5 + $ 3.2	$ 36.2

Thus the overhead cost per unit of ceiling fan = $ 36.2

Calculation of total manufacturing cost per unit of ceiling fan :

The total manufacturing cost is calculated as follows

= Direct Materials cost + Direct labour cost + Overhead costs

As per the information given in the question we have

Direct Materials cost per unit of ceiling fan = $ 75 ; Direct labour cost per unit of ceiling fan = Nil ; Overhead cost per unit of ceiling fan = $

Applying the above information in the formula we have the total manufacturing costs as

= $ 75 + $ 0 + $ 36.2

= $ 111.20 ( when rounded off to the nearest cent )

Thus the total manufacturing cost per ceiling fan = $ 111.20

The solution is Option B. $ 111.20