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Nichols Inc. manufactures remote controls. Currently the company uses a plantminuswide rate for allocating manufacturing overhead. The plant manager is considering switchingminusover to ABC costing

Nichols Inc. manufactures remote controls. Currently the company uses a

plantminuswide

rate for allocating manufacturing overhead. The plant manager is considering

switchingminusover

to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

Activities

Cost driver

Allocation Rate

Material handling

Number of parts

$2 per part

Assembly

Labor hours

$20 per hour

Inspection

Time at inspection station

$3 per minute

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $200 per labor hour.

What are the indirect manufacturing costs per remote control assuming an

activityminusbasedminuscosting

method is used and a batch of 50 remote controls are produced? The batch requires 100 parts, 6 direct manufacturing labor hours, and 2.5 minutes of inspection time.

A.

$4.00 per remote control

B.

$327.50 per remote control

C.

$6.55 per remote control

D.

$24.00 per remote control

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