Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 5 activities that occur at the manufacturing plant monthly: Activity Total Costs Volume of Cost Driver
Material handling $100,000 200,000 parts
Supervision of direct labour 105,000 70 employees
Janitorial and cleaning 150,000 3,000 hours
Machining 240,000 6,000 machine hours
Total costs $595,000
The above activities are used by the two departments as follows:
Assembly Testing
Material handling 150,000 parts 50,000 parts
Supervision of direct labour 30 employees 40 employees
Time spent cleaning 2,000 hours 1,000 hours
Number of machine hours 4,000 machine hours 2,000 machine hours
What is the ABC allocation rate for supervision of direct labour?
A)$3,500 per employee
B)$1,500 per employee
C)$0.50 per part
D)$50 per hour spent in supervision

Question

Quizplus · Accepted Answer

To calculate the ABC allocation rate for supervision of direct labour, we need to divide the total cost for that activity ($105,000) by the volume of the cost driver (70 employees).

ABC allocation rate = $105,000 / 70 employees = $1,500 per employee

Therefore, the correct answer is B.

As for the best choice(s), more information is needed about what decision needs to be made or what is being evaluated. The question only asks for the ABC allocation rate for one activity, so it is unclear what other choices there are to be made.

Quick Start Engines Has Two Departments, Assembly and Testing