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:
Model A $28
Model B $32
Model C $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 number of parts, and the cost driver for testing is the number of units of product. Total costs and production volumes for the year 2012 were estimated as follows:
$$\begin{array} { | l | r | r | r | }
\hline & \text { Total cost } &{ \text { Total units } } & \
\hline \text { Assembly } & \$ 780,000 & 120,000 & \text { Machine hours } \
\hline \text { Materials management } & \$ 120,000 & 80,000 & \text { Parts } \
\hline \text { Testing } & \$ 22,500 & 5,000 & \text { Units } \
\hline
\end{array}$$
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The Model A radio requires 12 parts to construct, and also requires 16 machine hours of processing. What is the manufacturing cost to make one unit of Model A?
A) $150.00
B) $132.00
C) $126.50
D) $154.50

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:
Model A $28
Model B $32
Model C $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 number of parts, and the cost driver for testing is the number of units of product. Total costs and production volumes for the year 2012 were estimated as follows:
$$\begin{array} { | l | r | r | r | } 
\hline & \text { Total cost } &{ \text { Total units } } & \
\hline \text { Assembly } & \$ 780,000 & 120,000 & \text { Machine hours } \
\hline \text { Materials management } & \$ 120,000 & 80,000 & \text { Parts } \
\hline \text { Testing } & \$ 22,500 & 5,000 & \text { Units } \
\hline
\end{array}$$
-
The Model A radio requires 12 parts to construct, and also requires 16 machine hours of processing. What is the manufacturing cost to make one unit of Model A?
A) $150.00
B) $132.00
C) $126.50
D) $154.50

Quizplus · Accepted Answer

The manufacturing cost for Model A includes direct materials and overhead costs. Overhead costs are calculated using activity-based costing:  - Assembly cost per machine hour = $780,000 / 120,000 = $6.50  - Materials management cost per part = $120,000 / 80,000 = $1.50  - Testing cost per unit = $22,500 / 5,000 = $4.50  For Model A:  - Assembly cost = 16 machine hours * $6.50 = $104  - Materials management cost = 12 parts * $1.50 = $18  - Testing cost = $4.50  Total manufacturing cost = Direct materials ($28) + Assembly ($104) + Materials management ($18) + Testing ($4.50) = $154.50

Orlando Avionics Makes Three Types of Radios for Small Aircraft-Model