Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June:
$$\begin{array} { | l | l | l | l | }
\hline \text { Activity } & \begin{array} { l }
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { l }
\text { Estimated Quantity of } \
\text { Allocation Base }
\end{array} \
\hline \text { Materials handling } & \$ 3,150 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Assembling } & \$ 13,860 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Packaging } & \$ 2,730 & \text { Number of pillows } & 1,050 \text { pillows } \
\hline
\end{array}$$ Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50.
What is the total manufacturing cost per pillow?
A) $16.20
B) $22.30
C) $18.50
D) $26.50

Question

Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June:
$$\begin{array} { | l | l | l | l | } 
\hline \text { Activity } & \begin{array} { l } 
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { l } 
\text { Estimated Quantity of } \
\text { Allocation Base }
\end{array} \
\hline \text { Materials handling } & \$ 3,150 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Assembling } & \$ 13,860 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Packaging } & \$ 2,730 & \text { Number of pillows } & 1,050 \text { pillows } \
\hline
\end{array}$$ Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50.
What is the total manufacturing cost per pillow?
A) $16.20
B) $22.30
C) $18.50
D) $26.50

Quizplus · Accepted Answer

The total manufacturing cost per pillow includes direct materials and allocated indirect costs. Direct materials cost is $3.50 per pillow. Indirect costs are calculated as follows: Materials handling cost per part is $3,150 / 4,200 = $0.75, so per pillow (4 parts) is $3.00. Assembling cost per part is $13,860 / 4,200 = $3.30, so per pillow is $13.20. Packaging cost per pillow is $2,730 / 1,050 = $2.60. Total cost per pillow = $3.50 + $3.00 + $13.20 + $2.60 = $22.30.

Sleep Tight Company Manufactures Pillows Using an Activity-Based Costing System