Nichols Inc.manufactures remote controls.Currently the company uses a plant-wide rate for allocating manufacturing overhead.The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $20 per labor hour.
What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 10 remote controls are produced? The batch requires 100 parts,5 direct manufacturing labor hours,and 3 minutes of inspection time.
A)$2.00 per remote control
B)$63.00 per remote control
C)$35.00 per remote control
D)$630.00 per remote control

Question

Nichols Inc.manufactures remote controls.Currently the company uses a plant-wide rate for allocating manufacturing overhead.The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $20 per labor hour.
What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 10 remote controls are produced? The batch requires 100 parts,5 direct manufacturing labor hours,and 3 minutes of inspection time.
A)$2.00 per remote control 
B)$63.00 per remote control 
C)$35.00 per remote control 
D)$630.00 per remote control

Quizplus · Accepted Answer

($5 × 100)+ ($20 × 5)+ ($10 × 3)= $630 per batch / 10 units per batch = $63.00 per unit