The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an ac
ID: 3174396 • Letter: T
Question
The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an
activityminusbased
costing system to allocate all manufacturing conversion costs. Each chair consists of
10
separate parts totaling
$135
in direct materials, and requires
5
hours of machine time to produce. Additional information follows:
Activity
Allocation Base
Cost Allocation Rate
Materials handling
Number of parts
$2.75
Machining
Machine hours
$2
Assembling
Number of parts
$1.50
Packaging
Number of finished units
$3.75
What is the cost of machining per chair?
Activity
Allocation Base
Cost Allocation Rate
Materials handling
Number of parts
$2.75
per partMachining
Machine hours
$2
per machine hourAssembling
Number of parts
$1.50
per partPackaging
Number of finished units
$3.75
per finished unitExplanation / Answer
A chair required 5 machine hours to produce. and cost of machining per hour =2
Hence we have 5 times 2 $ money required for machining per chair
which means the cost of machining per chair = 2*5 =$10
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