35. Sparrow Manufacturing manufactures small parts and uses an activity-based co

Question

35. Sparrow Manufacturing manufactures small parts and uses an activity-based costing system Activity Est. Indirect ActivityAllocation base Cost allocation rate Costs Materials Assemblin Packagiin $70,000Material moves $2.00/move $240,000Direct labor hours$8.00/dir. labor hour $80,000 | # of finished units | $0.80/finished unit The following parts were produced in October with the following information: Part # Produced | Materials Costs $2,500 $7,000 $11,250 # Moves | 2,500 3,500 4,500 800 1,500 2,200 Dir. Labor Hrs. 200 300 1,000 Total manufacturing costs for part A is: A. $ 7,700. B. $ 3,200. C. S 5,200 D. S 5,700.

Explanation / Answer

Solution:

Manufacturing cost of Part A = Material cost + activity cost = $2,500 + $5,200 = $7,700

Hence option A is correct.

Computation of activity cost assigned to Part A Activity Cost Cost Driver Allocation rate Part A Allocation Qty Allocated Overhead Materials $70,000.00 Material moves $2.00 800 $1,600.00 Assembling $240,000.00 Direct labor hours $8.00 200 $1,600.00 Packaging $80,000.00 Nos of finished units $0.80 2500 $2,000.00 Total $5,200.00

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