Blade Breeze Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct materials cost is $70, and each ceiling fan requires 2.50 hours of machine time to manufacture. Additional information is as follows: $$\begin{array} { | l | l | r | }
\hline \text { Activity } & \text { Allocation Base } & \begin{array} { c }
\text { Predetermined Overhead } \
\text { Allocation Rate }
\end{array} \
\hline \text { Materials handling } & \text { Number of parts } & \$ 0.08 \
\hline \text { Machining } & \text { Machine hours } & 7.20 \
\hline \text { Assembling } & \text { Number of parts } & 0.35 \
\hline \text { Packaging } & \text { Number of finished units } & 2.80 \
\hline
\end{array}$$ What is the cost of machining per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)
A) $18.00
B) $70.00
C) $144.00
D) $196.00

Question

Blade Breeze Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct materials cost is $70, and each ceiling fan requires 2.50 hours of machine time to manufacture. Additional information is as follows: $$\begin{array} { | l | l | r | } 
\hline \text { Activity } & \text { Allocation Base } & \begin{array} { c } 
\text { Predetermined Overhead } \
\text { Allocation Rate }
\end{array} \
\hline \text { Materials handling } & \text { Number of parts } & \$ 0.08 \
\hline \text { Machining } & \text { Machine hours } & 7.20 \
\hline \text { Assembling } & \text { Number of parts } & 0.35 \
\hline \text { Packaging } & \text { Number of finished units } & 2.80 \
\hline
\end{array}$$ What is the cost of machining per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)
A) $18.00
B) $70.00
C) $144.00
D) $196.00

Quizplus · Accepted Answer

The cost of machining per ceiling fan can be calculated using the activity-based costing system. The total cost of machining is divided by the number of ceiling fans to get the cost per unit.

Total cost of machining = (Number of parts per fan * Direct machine hours per part * Cost per machine hour)
= (20 * 2.50 * $1.44) = $72.00
Cost of machining per ceiling fan = (Total cost of machining / Number of ceiling fans)
= ($72.00 / 4) = $18.00

Therefore, the best choice is A) $18.00.

Blade Breeze Company Manufactures Ceiling Fans and Uses an Activity-Based