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: 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:
What is the allocation rate for the testing activity? (Please round to the nearest cent.)

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:  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:
 What is the allocation rate for the testing activity? (Please round to the nearest cent.)

Quizplus · Accepted Answer

To find the allocation rate for the testing activity, we divide the total testing costs ($450,000) by the total number of units produced (100,000).

$450,000 ÷ 100,000 units = $4.50 per unit

Therefore, the answer is B.

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