Problem - The Niehbur Manufacturing Company in Hondo, Texas, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:
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Direct materials cost
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$81.00
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Activity costs allocated
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?
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Manufacturing product cost
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?
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The activities required to build the component follow.
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Activity
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Allocation Base
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Cost Allocated to Each Unit
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Start Station
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Number of Row Component Chassis
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2 x $ 1.30 =$ 2.60
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Dip Station
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Number of Dip Insertions
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? x $ 0.40=12.00
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Manual Insertion
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Number of Manual insertions
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12 x $ 0.80 = ?
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Wave Solder
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Number of Components Soldered
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1 x $ 1.60 = 1.60
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Backload
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Number of Backload Insertions
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7 x $ ?= 4.20
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Test
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Testing Hours
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0.40 x $80.00 = ?
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Defect Analysis
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Defect Analysis Hours
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0.10 x $? = 5.00
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Total
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$?
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Requirements
1. Fill in the blanks in both the opening schedule and the list of activities.
2. How is labor cost assigned to products under this ABC product costing system?
3. Why might managers favor this ABC system instead of Niehbur's older system, which allocated all conversion costs on the basis of direct labor?