Cool Appliance manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.
|
Activity
|
|
Cost
|
Cost Driver
|
|
Material handling
|
$ 225,000
|
|
Number of parts
|
|
Material insertion
|
2,475,000
|
|
Number of parts
|
|
Automated machinery
|
840,000
|
|
Machine hours
|
|
Finishing
|
170,000
|
|
Direct labor hours
|
|
Packaging
|
170,000
|
|
Orders shipped
|
|
Total
|
$3,880,000
|
|
|
The following information pertains to the three product lines for next year:
|
|
Economy
|
Standard
|
Deluxe
|
|
Units to be produced
|
10,000
|
5,000
|
2,000
|
|
Orders to be shipped
|
1,000
|
500
|
200
|
|
Number of parts per unit
|
10
|
15
|
25
|
|
Machine hours per unit
|
1
|
3
|
5
|
|
Labor hours per unit
|
2
|
2
|
2
|
1. What is Cool Appliance's cost application rate for the material-handling activity?
A. $1.00 per part.
B. $2.25 per part.
C. $6.62 per labor hour.
D. $13.23 per part.
E. A rate other than those listed above.
2. What is Cool Appliance's cost application rate for the automated machinery activity?
A. $24.00 per machine hour.
B. $24.50 per labor hour.
C. $49.42 per unit.
D. $50.00 per machine hour.
E. A rate other than those listed above.