Durable Engines Company uses ABC to account for it manufacturing process. Activi

Question

Durable Engines Company uses ABC to account for it manufacturing process.

Activities Indirect activity budget Allocation base (cost driver) Materials handling $ 36,000 Based on number of parts Machine setup $ 19,200 Based on number of setups Assembling $ 6,000 Based on number of parts Packaging $ 12,800 Based on number of finished units

Durable Engines Company expects to produce 2,000 engines. Durable Engines Company also expects to use 12,000 parts and have 16 setups.

The allocation rate for packaging is:

Select one:

a. $3.00.

b. $5.28.

c. $9.60.

d. $6.40.

Activities Indirect activity budget Allocation base (cost driver) Materials handling $ 36,000 Based on number of parts Machine setup $ 19,200 Based on number of setups Assembling $ 6,000 Based on number of parts Packaging $ 12,800 Based on number of finished units

Explanation / Answer

d. $6.40. Statement showing computations Activities Indirect Activity Budget Allocation Base No of activity Rate per activity Material Handling                                  36,000.00 Based on number of parts                     12,000.00                             3.00 Machine setups                                  19,200.00 Based on number of setups                              16.00                     1,200.00 Assembling                                    6,000.00 Based on number of parts                     12,000.00                             0.50 Packaging                                  12,800.00 Based on number of finished units                        2,000.00                             6.40

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