Question
Rocket Products 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
Rocket Products 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 | $ 230,000 | Number of parts |
Material insertion | 2,480,000 | Number of parts |
Automated machinery | 845,000 | Machine hours |
Finishing | 175,000 | Direct labor hours |
Packaging | 175,000 | Orders shipped |
Total | $ 3,905,000 |
The following information pertains to the three product lines for next year:
Economy | Standard | Deluxe | |
---|---|---|---|
Units to be produced | 10,500 | 5,500 | 2,500 |
Orders to be shipped | 1,050 | 550 | 250 |
Number of parts per unit | 10 | 15 | 25 |
Machine hours per unit | 1 | 3 | 5 |
Labor hours per unit | 2 | 2 | 2 |
Assume that Rocket is using a volume-based costing system, and the preceding overhead costs are applied to all products on the basis of direct labor hours. The overhead cost that would be assigned to the Deluxe product line is closest to:
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