Ace Plastics produces many different kinds of products all in one manufacturing facility. They have identified four activities for their costing system: The activity rates are as follows:
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. How much is the manufacturing cost for one unit of product? (Please round to the nearest tenth of a cent.)

Question

Ace Plastics produces many different kinds of products all in one manufacturing facility. They have identified four activities for their costing system:  The activity rates are as follows:
 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. How much is the manufacturing cost for one unit of product? (Please round to the nearest tenth of a cent.)

Quizplus · Accepted Answer

The total manufacturing cost for the order can be calculated using the activity rates as follows:

Direct materials cost = $540
Direct labor cost = $90
Purchase orders = 4 x $25 = $100
Chemical base = 2 x $55 = $110
Direct labor hours = 8 x $20 = $160

Total manufacturing cost = $540 + $90 + $100 + $110 + $160 = $1,000

The cost per unit can be calculated by dividing the total manufacturing cost by the number of units produced:

Cost per unit = $1,000 ÷ 3,000 units = $0.3333

Rounding to the nearest tenth of a cent gives us the final answer of $0.395. Therefore, the correct choice is C.

Ace Plastics Produces Many Different Kinds of Products All in One