8) Morgana Avionics makes three types of radios for small aircraft: Model A, Mod
ID: 2415331 • Letter: 8
Question
8) Morgana Avionics makes three types of radios for small aircraft: Model A, Model B, and Model C. The manufacturing operations are mechanized and there is no direct labor. Manufacturing overhead costs are significant, and Morgana has adopted an activity-based costing system. Direct materials costs per unit for each model are as follows:
Model A
$28
Model B
$32
Model C
$40
Morgana has three activities: assembly, materials management, and testing. The cost driver for assembly is machine hours. The cost driver for materials management is number of parts, and the cost driver for testing is the number of units of product. Total costs and production volumes for the year 2015 were estimated as follows:
Total cost
Total units
Cost Driver
Assembly
$780,000
120,000
Machine hours
Materials management
$120,000
80,000
Parts
Testing
$22,500
5,000
Units
The Model A radio requires 12 parts to construct, and requires 16 machine hours of processing. What is the manufacturing cost to make one unit of Model A?
A) $150.00
B) $132.00
C) $126.50
D) $154.50
Note: Supporting computations are required for this problem. Failure to do so will result in loss of points.
Model A
$28
Model B
$32
Model C
$40
Explanation / Answer
Manufacturing cost to make one unit of Model A
Direct material $28
Assembly $104
Materials management $18
Testing $4.5
Total $154.5
Calculation of assembly cost = total cost / number of units = $780000/ 120000 = 6.5
assembly cost = 6.5 * 16 machine hours = 104
Materials management cost = total cost / number of units = $120000 / 80000 =1.5
Materials management cost = 1.5 * 12 parts = 18
Testing cost = total cost / number of units = $22500 / 5000 = 4.5
Testing cost = 4.5
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