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Adventures manufactures two products: Accessory A and Accessory B. To produce these accessories, the company has the following activities and their respective total costs for
Adventures manufactures two products: Accessory A and Accessory B. To produce these accessories, the company has the following activities and their respective total costs for the period: Overhead Item Expected Costs Cost Driver Setting up machines $68,000 Number of setups Material Handling $67,320 Number of moves Quality Inspections $18,600 Number of inspections Total Overhead Costs $153,920 Information on the number of activities for each product is as follows: Accessory A Accessory B Direct materials $78,455 $109,465 Direct labor $20,500 $19,600 Units completed 8,000 6,300 Direct labor- hours 1,025 980 Number of setups 1250 750 Number of moves 155 205 Number of inspections 45 30 Questions: A. (3 points) Calculate the activity rate (cost per activity) for each of the three activities. B. (6 points) Using the activity rates, compute the total activity cost allocated to both Accessory A and Accessory B. C. (2 points) Based on the allocated costs, what is the total production cost for Accessory A and Accessory B? D. (2 points) If the company wants to earn a 20% profit margin on each product, what should be the selling price per unit for Accessory A and Accessory B?
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