Dream Sewing Company uses activity based costing to account for its manufacturing process. Following are the four identified with the process and their budgeted costs for the month of december:
Activity Total Budgeted Cost Allocation Base
Material handling $55,000 Number of parts
Machine setup $16,500 Number of setups
Assembling $23,000 Number of parts
Packaging $8,500 Number of finished units
Dream expects to produce 1000 sewing machines in the month of december. The sewing machines are expected to use 25,000 parts and require 15 set ups.
A) Compute the cost allocation rate for each activity
B) Compute the average manufacturing cost of each sewing machine assuming direct materials are $175 per machine