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29 March, 14:16

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 20 parts and requires 5 hours of machine time. Additional information follows:

Activity Allocation Base Cost Allocation Rate

Materials handling Number of parts $0.50 per part

Machining Machine hours $14.00 per machine hour

Assembling Number of parts $1.00 per part

Packaging Number of finished units $2.00 per finished unit

What is the cost of machining per phone?

a. $30.00

b. $42.00

c. $6.00

d. $15.00

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Answers (1)
  1. 29 March, 17:42
    0
    The correct answer is $70

    Explanation:

    Giving the following information:

    $40.00 of direct materials

    includes 20 parts

    requires 5 hours of machine time.

    Activity (Allocation Base) - Cost Allocation Rate

    Materials handling (Number of parts) - $0.50 per part

    Machining (Machine hours) - $14.00 per machine hour

    Assembling (Number of parts) - $1.00 per part

    Packaging (Number of finished units) - $2.00 per finished unit

    Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

    Machining = 14*5hours = $70
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