Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct material cost is $90, and each ceiling fan requires 2.50 hours of machine time to manufacture. Additional information is as follows: $$\begin{array} { | l | l | r | }
\hline \text { Activity } & \text { Allocation Base } & \begin{array} { c }
\text { Predetermined Overhead } \
\text { Allocation Rate }
\end{array} \
\hline \text { Materials handling } & \text { Number of parts } & \$ 0.04 \
\hline \text { Machining } & \text { Machine hours } & 6.00 \
\hline \text { Assembling } & \text { Number of parts } & 0.20 \
\hline \text { Packaging } & \text { Number of finished units } & 2.50 \
\hline
\end{array}$$ What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places.)
A) $0.80
B) $6.00
C) $2.50
D) $6.25

Question

Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct material cost is $90, and each ceiling fan requires 2.50 hours of machine time to manufacture. Additional information is as follows: $$\begin{array} { | l | l | r | } 
\hline \text { Activity } & \text { Allocation Base } & \begin{array} { c } 
\text { Predetermined Overhead } \
\text { Allocation Rate }
\end{array} \
\hline \text { Materials handling } & \text { Number of parts } & \$ 0.04 \
\hline \text { Machining } & \text { Machine hours } & 6.00 \
\hline \text { Assembling } & \text { Number of parts } & 0.20 \
\hline \text { Packaging } & \text { Number of finished units } & 2.50 \
\hline
\end{array}$$ What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places.)
A) $0.80
B) $6.00
C) $2.50
D) $6.25

Quizplus · Accepted Answer

To calculate the cost of materials handling per ceiling fan, we need to know the total cost of materials handling and then divide it by the total number of ceiling fans produced. Based on the information given, we do not have the total cost of materials handling, but we do know that each ceiling fan has 20 separate parts and the direct material cost is $90. Therefore, the cost of materials handling per part is:

Cost of materials handling per part = Total direct material cost / Number of parts
Cost of materials handling per part = $90 / 20 = $4.50

Since each ceiling fan has 20 parts, the cost of materials handling per ceiling fan is:

Cost of materials handling per ceiling fan = Cost of materials handling per part x Number of parts per ceiling fan
Cost of materials handling per ceiling fan = $4.50 x 20 = $90

Therefore, the cost of materials handling per ceiling fan is $90/100 = $0.80. The correct answer is A.

Whirlwind Fan Company Manufactures Ceiling Fans and Uses an Activity-Based