AirBo Manufacturing uses activity-based costing for its jet engine process. AirB

Question

AirBo Manufacturing uses activity-based costing for its jet engine process. AirBo separates their manufacturing overhead into three activities: materials handling, assembly and inspection. The following is the budgeted cost for each manufacturing activity and their cost allocation bases:

These jet engines are expected to consume 6,000 parts, require 3,000 direct labor hours and 125 inspections. Suppose AirBo builds two types of engines (Engine A and Engine B). During the month, engine A consumed 1,500 parts, required 2,000 direct labor hours and required 100 inspections. Engine B consumed 5,000 parts, required 1,500 direct labor hours and required 100 inspections. During the month, the company manufactured 15 type A engines and 17 type B engines.

a) For each manufacturing activity, calculate the activity rate.

Do not enter dollar signs or commas in the input boxes.
Round your answers in part a) to 2 decimal places.

Materials handling: $Answer

Mark 1.00 out of 1.00

per part
Assembly: $Answer

Mark 1.00 out of 1.00

per hour
Inspection: $Answer

Mark 1.00 out of 1.00

per inspection

b) Determine the manufacturing overhead unit cost for each type of engine.

Round your answers in part b) to the nearest whole number.

Engine A: $Answer

Mark 1.00 out of 1.00

Engine A unit cost: $Answer

Mark 0.00 out of 1.00

Engine B: $Answer

Mark 0.00 out of 1.00

Engine B unit cost: $Answer

Mark 0.00 out of 1.00

Materials Handling Assembly Inspection Total Budgeted Cost $600,000 $150,000 $200,000 Cost Allocation Base Number of parts Number of direct labor hours Number of inspections

Explanation / Answer

a) For each manufacturing activity, calculate the activity rate. Round your answers in part a) to 2 decimal places.

Materials handling: $100 per part ($600000/6000 parts)

Assembly: $50 per direct labor hour ($150000/3000 hrs)

Inspection: $1600 per inspection ($200000/125 inspections)

b) Determine the manufacturing overhead unit cost for each type of engine. Round your answers in part b) to the nearest whole number.

Engine A: $27,333 (100*1500 + 50*2000 + 1600*100)/15

Engine B unit cost: $43,235 (100*5000 + 50*1500 + 1600*100)/17

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