Question

Edwards Company manufactures low-cost wooden chairs and uses activity-based costing. The following information is for the month of March. Activity Materials handling Assembly Packaging Estimated Indirect activity costs $ 3,500 12,000 5,750 Allocation base Number of parts Number of parts Number of chairs Estimated quantity of allocation base 5,000 parts 5,000 parts 1,250 chairs Each chair consists of 4 parts and the direct materials cost per chair is $7.00. Based on the information given for Edwards Company, what is the cost of materials handling and assembly per chair? Multiple Choice O O $17.00 $4.60 O O $14.40 O $12.40. O O $24.00

Answer 1

following is the detailed explanation for correct option 4. all other options are incorect because according to activity based costing this is the way of calculating the cost of material handling and assembly per chair. The answer obtained by applying activity based costing is $12.40. That's why all other options are incorrect.

Solutions cact of materials handling and assen assembly perchair w $ 12.40%. option 4² is correct and other options are incorrect. Following is the detail explanation for the correct option or answera

  

I step-ta Calculation of Activity Rate/overhead Rate for each activity Formula for cadculating Activity Rate / Overhead Rate Estimated Indirect Activity Rate /overhead Rete e = Activity cost Estimated quantity of allocation Base Applying formula for calculating Activity Rate using values given in the questions Activity Estimated Estimated 1 Activity quantity of Indirect allocation basel activity casts sate/ overhead Rate 3500 5000 Material $_3500 5000 parts handling Pasta Assembly 5000 Parts. 12000 12000 5000 - $24.4 per parts

DATE PAGE Packaging 5750 1950 Chairs 5750 1950 -$4.6. Per chairs Note: we only consider Monterdent overhead patel Activity state of Matenbal brandling and Assembly Activity because we feawal tea ane calculating cost of materials handling and assembly bex char

DATE PAGE both Material Material handling step-2 calculation of aggregate Activity Pater for and assembly Activity Aggregate Activity Rate = Activity Pate of Material handling Activity f Activity Rate of Assembly Activity 0.7 + 9.4 $3.1 Per parts Ig. 4 Stekt for calculating cost of materials handling and Assembly pes chair, Multiply 4 Posts by Aggregate Activity Rate cost of Maten'al frandlinge u perte x Aganegate and Assembly Per chair Activity Rate 4 X 3.1 $12.40 Per chair pesante, cost of Material handling and assembly Perchair is to $12.40 Per chair. Hence option 4' is right and all the other options to the wrong.

DATE PAGE Note > Por calculating Material handling and assembly cost per chais, we multiply uparts by Aggregate Activity Rate because each chair care consist 4 Parts as given in the question WA