Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June:

Each pillow consists of 3 parts;the total direct materials cost per pillow is $8.00.
What is the total cost of materials handling and assembling for each pillow?

Question

Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June:

Each pillow consists of 3 parts;the total direct materials cost per pillow is $8.00.
What is the total cost of materials handling and assembling for each pillow?

Quizplus · Accepted Answer

Since the total direct materials cost per pillow is $8.00 and this cost is not included in the conversion cost, we can calculate the total conversion cost by subtracting the direct materials cost from the total cost of manufacturing a pillow.

Total cost of manufacturing a pillow = $14.50
Direct materials cost per pillow = $8.00

So, the total cost of materials handling and assembling for each pillow is:

Total cost of manufacturing a pillow - Direct materials cost per pillow 
= $14.50 - $8.00 
= $6.50

Therefore, the total cost of materials handling and assembling for each pillow is $6.50, which is closest to option C ($5.10). So, the best choice is C.

Traditions Home Accessories Company Manufactures Pillows Using an Activity-Based Costing