Ace Plastics produces many different kinds of products all in one manufacturing facility. They have identified four activities for their costing system:
Materials management - allocated by number of purchase orders
Chemical processing - allocated on metric tons
Molding - allocated on direct labor hours
Packaging - allocated by number of units produced
The activity rates are as follows:
$$\begin{array} { | l | r| r | }
\hline \text { Materials management } & \$ 12.00 & \text { Per purchase order } \
\hline \text { Chemical processing } & \$ 7.50 & \text { Per metric ton } \
\hline \text { Molding } & \$ 24.00& \text { Per direct labor hour } \
\hline \text { Packaging } & \$ 0.10 & \text { Per unit } \
\hline
\end{array}$$
Ace received an order for 3,000 plastic toys. The engineering design shows that the order will require $540 of direct material cost in total, $90 of direct labor cost, will require 4 purchase orders, will use 2 metric tons of chemical base, will need 8 direct labor hours, and will produce 3.000 units of product. What will the full production cost of the order be?
A) $630
B) $645
C) $1,095
D) $1,185

Question

Ace Plastics produces many different kinds of products all in one manufacturing facility. They have identified four activities for their costing system:
Materials management - allocated by number of purchase orders
Chemical processing - allocated on metric tons
Molding - allocated on direct labor hours
Packaging - allocated by number of units produced
The activity rates are as follows:
$$\begin{array} { | l | r| r | } 
\hline \text { Materials management } & \$ 12.00 & \text { Per purchase order } \
\hline \text { Chemical processing } & \$ 7.50 & \text { Per metric ton } \
\hline \text { Molding } & \$ 24.00& \text { Per direct labor hour } \
\hline \text { Packaging } & \$ 0.10 & \text { Per unit } \
\hline
\end{array}$$
Ace received an order for 3,000 plastic toys. The engineering design shows that the order will require $540 of direct material cost in total, $90 of direct labor cost, will require 4 purchase orders, will use 2 metric tons of chemical base, will need 8 direct labor hours, and will produce 3.000 units of product. What will the full production cost of the order be?
A) $630
B) $645
C) $1,095
D) $1,185

Quizplus · Accepted Answer

The full production cost includes direct material, direct labor, and allocated activity costs:  - Direct material cost: $540  - Direct labor cost: $90  - Materials management: 4 purchase orders x $12.00 = $48  - Chemical processing: 2 metric tons x $7.50 = $15  - Molding: 8 direct labor hours x $24.00 = $192  - Packaging: 3,000 units x $0.10 = $300  Total cost = $540 + $90 + $48 + $15 + $192 + $300 = $1,185.

Ace Plastics Produces Many Different Kinds of Products All in One