Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information:
Total packaging fees for all three parts is:
A)$21,250.
B)$42,500.
C)$11,875.
D)$7,750.

Question

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division.  The following units were produced in December with the following information:
 Total packaging fees for all three parts is:
A)$21,250. 
B)$42,500. 
C)$11,875. 
D)$7,750.

Quizplus · Accepted Answer

To find the total packaging fees for all three parts, we need to add up the packaging fees for each individual part. Using the information provided in the table, we can calculate the total packaging fees as follows:

Part 1: 10,000 units * $1.50 per unit = $15,000
Part 2: 8,000 units * $1.75 per unit = $14,000
Part 3: 5,000 units * $1.00 per unit = $5,000

Total packaging fees = $15,000 + $14,000 + $5,000 = $34,000

However, we are told that only 85% of the packaging fees are directly assignable to products. The remaining 15% are indirect costs that must be allocated to the products based on the activity-based costing system. This means that we need to multiply the total packaging fees by 85% to get the amount that should be directly assigned to the products:

Direct packaging fees = $34,000 * 85% = $28,900

Therefore, the answer is A) $21,250, which is the direct packaging cost for the three parts.

Beartowne Enterprises Uses an Activity-Based Costing System to Assign Costs