s Question Completion Status: Fame Company manufactures engines. Fame produces a
ID: 2332432 • Letter: S
Question
s Question Completion Status: Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one electronac component, nhuch is purchased from two local suppliers: Hydra International and Parable Company Both suppliers are reliable and rarely deliver late Hydra sells the component for $12.00 per unit, while Parable sells the same component for S 10.00 per unit. Fame purchases S0% ofts comp rents firom Parable because of the lower price it offers The total anoual demand is 95,000 units I Activity Data Inspecting components (sanmpling cnly) Rewerking products (due to failed component) Warranty work (due to faled component) Actiuuty Cost 210,000 $2.454,000 $1 923.000 Il Supplier Daa Unit purchase price Uaits purchased Sampling hours Rework hours Warrasty hours ByiaRaxabls IntematicnalCompany $10.00 19,00076,000 60 2,600 3,500 7,000 $1200 550 Calcuiate the total activity cost per composent associated with using Hydra Internatioeal as the supplies (Note Round tbe activity rates to the nearest dellar and the cost per component to twe decimal places) Note a 524.53 b S20.00 E522.80 o ".110.00Explanation / Answer
Solution:
Activity cost per component = $466,140 / 19000 = $24.53 per component
Hence option a is correct.
Computation of activity cost assigned to Hydra International Activity Cost Cost Driver Qty of cost driver Allocation rate Hydra International Allocation Qty Allocated Overhead Inspecting component $210,000.00 Sampling hours 2660 $79.00 60 $4,740.00 Reworking products $2,454,000.00 Rework hours 3950 $621.00 150 $93,150.00 Warranty work $1,923,000.00 Warranty hours 7550 $255.00 550 $140,250.00 Purchasing cost $12.00 19000 $228,000.00 Total $466,140.00Related Questions
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