Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May: $$\begin{array} { | l | c | c | c | }
\hline \text { Activity } & \begin{array} { c }
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { c }
\text { Estimated Quantity of } \
\text { Allocation Base }
\end{array} \
\hline \text { Materials handling } & \$ 3,500 & \text { Number of parts } & 5,000 \text { parts } \
\hline \text { Assembling } & \$ 12,000 & \text { Number of parts } & 5,000 \text { parts } \
\hline \text { Packaging } & \$ 5,750 & \begin{array} { c }
\text { Number of bread } \
\text { boxes }
\end{array} & 1,250 \text { bread boxes } \
\hline
\end{array}$$ Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. There is no direct labor. What is the total manufacturing cost per breadbox?
A) $17.40
B) $24.00
C) $12.40
D) $26.00

Question

Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May: $$\begin{array} { | l | c | c | c | } 
\hline \text { Activity } & \begin{array} { c } 
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { c } 
\text { Estimated Quantity of } \
\text { Allocation Base }
\end{array} \
\hline \text { Materials handling } & \$ 3,500 & \text { Number of parts } & 5,000 \text { parts } \
\hline \text { Assembling } & \$ 12,000 & \text { Number of parts } & 5,000 \text { parts } \
\hline \text { Packaging } & \$ 5,750 & \begin{array} { c } 
\text { Number of bread } \
\text { boxes }
\end{array} & 1,250 \text { bread boxes } \
\hline
\end{array}$$ Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. There is no direct labor. What is the total manufacturing cost per breadbox?
A) $17.40
B) $24.00
C) $12.40
D) $26.00

Quizplus · Accepted Answer

The total manufacturing cost per breadbox includes direct materials and allocated indirect costs. Direct materials cost is $7.00 per breadbox. Indirect costs are allocated as follows: Materials handling cost per part is $3,500 / 5,000 = $0.70 per part, and assembling cost per part is $12,000 / 5,000 = $2.40 per part. Each breadbox has 4 parts, so the total indirect cost for materials handling and assembling per breadbox is (0.70 + 2.40) * 4 = $12.40. Packaging cost per breadbox is $5,750 / 1,250 = $4.60. Therefore, the total manufacturing cost per breadbox is $7.00 (direct materials) + $12.40 (materials handling and assembling) + $4.60 (packaging) = $24.00.

Alpha Company Manufactures Breadboxes and Uses an Activity-Based Costing System