General Products Company manufactures toaster ovens and uses an activity-based c
ID: 2420463 • Letter: G
Question
General Products Company manufactures toaster ovens and uses an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of May:
Activity
Estimated Indirect Activity Costs
Allocation Base
Estimated Quantity of Allocation Base
Materials handling
$5,400
Number of parts
3,000 parts
Assembling
$9,600
Number of parts
3000 parts
Packaging
$2,500
Number of toaster ovens
1,000 toaster ovens
Each toaster oven consists of 3 parts. The direct materials cost per toaster oven is $25.00
What is the total manufacturing cost per toaster oven?
a. $42.50
b. $17.50 -wrong
c. $40.00
d. $15.00
I got this wrong on my quiz, how would you solve this?
Activity
Estimated Indirect Activity Costs
Allocation Base
Estimated Quantity of Allocation Base
Materials handling
$5,400
Number of parts
3,000 parts
Assembling
$9,600
Number of parts
3000 parts
Packaging
$2,500
Number of toaster ovens
1,000 toaster ovens
Explanation / Answer
ANSWER= A) 42.50
Total manufacturing cost per toaster oven = Direct material cost + conversion cost
= $ 25 + 17.50
= $42.50
where conversion cost =
Materials handling = ($5400 / 3000Parts) * 3parts = 5.40
Assembling = ($9600 / 3000 parts)* 3Parts = 9.60
Packaging = $2500/1000 = 2.50
Total conversion cost = 5.40 + 9.60 + 2.50 = 17.50
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