Orange uses activity-based costing. Two of Orange\'s production activities are k

ID: 2553742 • Letter: O

Question

Orange uses activity-based costing. Two of Orange's production activities are kitting (assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Orange spends $4,000,000 per month on kitting and $22,000,000 per month on boxing. Orange allocates the following: Kitting costs based on the number of parts used in the computer Boxing costs based on the cubic feet of space the computer requires Suppose Orange estimates it will use 200,000,000 parts per month and ship products with a total volume of 27,500,000 cubic feet per month. Assume that each desktop computer requires 200 parts and has a volume of 5 cubic feet What are the predetermined overhead allocation rates? (Round all calculations to the nearest cent.) Kitting Boxing OA 0.02 per part S0.80 per aubic foot 8. $0.02 per part S0.10 per cubic foot C. $50.00 per part $1.25 per cubic foot S0.15 per part $0.11 per cubic foot ? ? O D.

Explanation / Answer

Solution:

Calculation of Predetermined Overhead Allocation Rates

Kitting

Boxing

Estimated Overhead (A)

$4,000,000

$22,000,000

Estimated Usage of Activity (B)

200,000,000 Parts

27,500,000 Cubic Feet

Predetermined Overhead Allocation Rates

(A/B)

$0.02 per part

$0.80 per cubic foot

Hence, the correct option is A. $0.02 per part for kitting and $0.80 per cubic foot for boxing

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