The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year - lounge and patio. The company is considering introducing an activity-based costing system. Given below are each activity, its cost and its related activity driver.

Activity Cost Activity Driver

Material Setups 300,000 Number of setups

Material handling 250,000 Number of parts

Cutting 700,000 Number of parts

Assembly 600,000 Direct labour hours

Finishing 450,000 Number of units

The level of activity for the year is:

Lounge Patio

Units to be produced 10,000 5,000

Number of Setups 60 60

Number of parts per unit 10 5

Direct Labour Hours per unit 5 2

Under an activity-based costing system, what is the activity cost per unit of activity driver for material handling?

Select one:

a. $2.00 per part

b. $16.67 per part

c. $2.50 per part

d. $ 5.00 per part

e. $ 4.17 per direct labour hour