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Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing
Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over 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 $7 per part
Assembly Labor hours $20 per hour
Inspection Time at inspection station $10 per minute
The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $40 per labor hour.
What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 10 remote controls are produced? The batch requires 100 parts, 4 direct manufacturing labor hours, and 1 minutes of inspection time.
Select one:
a. $4.00 per remote control
b. $79.00 per remote control
c. $37.00 per remote control
d. $790.00 per remote control
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