Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June:
$\begin{array}{|l|r|r|r|}
\hline &\text { Estimated Indirect }&&\text { Estimated Quantity of } \
\text { Activity } & \text { Activity Costs } & \text { Allocation Base } & \text { Allocation Base }\
\hline \text { Materials handling } & \$ 3,150 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Assembling } & \$ 13,860 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Packaging } & \$ 2,730 & \text { Number of pillows } & 1,050 \text { pillows }\
\hline
\end{array}$

Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50.
- There is no direct labor. 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:
$\begin{array}{|l|r|r|r|}
\hline &\text { Estimated Indirect }&&\text { Estimated Quantity of }  \
\text { Activity } & \text { Activity Costs } & \text { Allocation Base } & \text { Allocation Base }\
\hline \text { Materials handling } & \$ 3,150 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Assembling } & \$ 13,860 & \text { Number of parts } & 4,200 \text { parts } \
\hline \text { Packaging } & \$ 2,730 & \text { Number of pillows } & 1,050 \text { pillows }\
\hline
\end{array}$

Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50.
- There is no direct labor. What is the total manufacturing cost per pillow?
A) $16.20
B) $22.30
C) $18.50
D) $26.50

Quizplus · Accepted Answer

To calculate the total manufacturing cost per pillow, we need to determine the overhead costs per pillow and add the direct materials cost. The overhead costs are calculated using the activity-based costing rates:  - Materials handling cost per part = $3,150 / 4,200 parts = $0.75 per part.  - Assembling cost per part = $13,860 / 4,200 parts = $3.30 per part.  - Packaging cost per pillow = $2,730 / 1,050 pillows = $2.60 per pillow.  Each pillow consists of 4 parts, so:  - Materials handling cost per pillow = 4 parts * $0.75 = $3.00.  - Assembling cost per pillow = 4 parts * $3.30 = $13.20.  Total overhead cost per pillow = $3.00 (materials handling) + $13.20 (assembling) + $2.60 (packaging) = $18.80.  Adding the direct materials cost of $3.50 per pillow, the total manufacturing cost per pillow = $18.80 + $3.50 = $22.30.

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