Orlando Avionics makes three types of radios for small aircraft-Model A, Model B

Question

Orlando Avionics makes three types of radios for small aircraft-Model A, Model B, and Model C The manufacturing operations are mechanized and there is no direct labor Manufacturing overhead costs are significant, and Orlando has adopted an activity - based costing system Direct materials costs per unit for each model are as follows: ModelA $28 Model B $32 ModeIC $40 Orlando has three activities-assembly, materials management, and testing. The cost driver for assembly is machine hours The cost driver for materials management is the number of parts, and the cost driver for testing is the number of units of product Total costs and production volumes for the year 2015 were estimated as follows: Total cost Allocation Base Cost Driver Assembly $780,000 120,000 Machine hours Materials management $120,000 80,000 Parts Testing $22,500 5,000 Units The Model A radio requires twelve parts to construct, and requires 16 machine hours of processing What is the manufacturing cost to make one unit of Model A? $1 2650 $1 5450 $1 3200 $15000

Explanation / Answer

The answer is B) $ 154.50

Total Cost Allocation Base Cost driver per cost Assembly          780,000                 120,000 Machine 6.5 Materials management          120,000                   80,000 parts 1.5 Testing            22,500                      5,000 units 4.5 Direct material              28.00 12 parts to contruct              18.00 Machine hours            104.00 Testing                 4.50 Cost            154.50

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