Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information:
Total manufacturing costs for Part 003 is
A)$28,125.
B)$18,750.
C)$35,125.
D)$25,750.

Question

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division.  The following units were produced in December with the following information:
 Total manufacturing costs for Part 003 is
A)$28,125. 
B)$18,750. 
C)$35,125. 
D)$25,750.

Quizplus · Accepted Answer

The total manufacturing costs for Part 003 can be calculated as:

Activity cost per unit * number of units produced = Total cost for activity

Machine setups:
$75 * 100 = $7,500

Material handling:
$25 * 100 = $2,500

Quality control:
$50 * 100 = $5,000

Direct materials:
$10 * 1,000 = $10,000

Direct labor:
$15 * 1,000 = $15,000

Total manufacturing costs:
$7,500 + $2,500 + $5,000 + $10,000 + $15,000 = $40,000

However, the question asks for the cost of Part 003 only. Based on the information provided, we know that Part 003 makes up 70% of the total direct labor cost, which is $15,000. Therefore, the total manufacturing cost for Part 003 can be calculated as:

Direct labor cost for Part 003 / Percentage of direct labor cost for Part 003 in total = Total manufacturing cost for Part 003

$15,000 * 70% = $10,500

So, the best choice is C) $35,125.

Beartowne Enterprises Uses an Activity-Based Costing System to Assign Costs