Orlando Avionics makes three types of radios for small aircraft—Model A, Model B, and Model C

Question

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:

Model A $20
Model B $33
Model C $36

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 were estimated as follows:

Total cost Allocation
Base Cost Driver
Assembly $792,000 123,750 Machine hours
Materials management $136,000 80,000 Parts
Testing $23,000 5,750 Units

The Model A radio requires 12 parts to construct and 20 machine hours of processing. What is the manufacturing cost to make one unit of Model A? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)
A) $168
B) $44
C) $152
D) $172

Answer 1

D .D)
Calculation of manufacturing cost per unit of Model A:
Direct materials $20
Assembly [($792,000 / 123,750 ) x 20 hours] 128.00
Materials management [($136,000 / 80,000 parts) x 12 parts] 20.40
Testing [($23,000 / 5,750 units) x 1 unit] 4.00
Total manufacturing cost $172