Question
Knickknack, Inc. manufactures two products: Odds and Ends. Knickknack operates at capacity and produces 5,000 units of Odds and 25,000 units of Ends. Knickknack is
Knickknack, Inc. manufactures two products: Odds and Ends. Knickknack operates at capacity and produces 5,000 units of Odds and 25,000 units of Ends. Knickknack is adopting an activity-based costing system and has identified three different activity areas, one of which is the Machinery Activity Area. The cost-allocation base of the machinery activity area is number of machine hours. Each Odd requires eight machine hours, whereas each End requires two machine hours. Costs in the machinery activity area are $1,800,000.
In an activity based costing system, the machinery cost per unit of Ends would be:
a. $20 per unit
b. $30 per unit
c. $40 per unit
d. $160 per unit
e. $180,000 per unit
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