General Products Company manufactures toaster ovens and uses an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of May: $$\begin{array} { | l | l | l | r | }
\hline { \text { Activity } } & \begin{array} { l }
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { l }
\text { Estimated Quantity of } \
\text { Allocation Buse }
\end{array} \
\hline \text { Materials handling } & \$ 5 , 4 0 0 & \text { Number of parts } & \text { 3,000 parts } \
\hline \text { Assembling } & \$ 9,600 & \text { Number of parts } & \text { 3,000 parts } \
\hline \text { Packaging } & \$ 2,500 & \text { Number of toaster ovens } & 1,000 \text { toaster ovens } \
\hline
\end{array}$$ Each toaster oven consists of 3 parts.The direct materials cost per toaster oven is $25.00
What is the total manufacturing cost per toaster oven?

Question

General Products Company manufactures toaster ovens and uses an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of May: $$\begin{array} { | l | l | l | r | } 
\hline { \text { Activity } } & \begin{array} { l } 
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { l } 
\text { Estimated Quantity of } \
\text { Allocation Buse }
\end{array} \
\hline \text { Materials handling } & \$ 5 , 4 0 0  & \text { Number of parts } & \text { 3,000 parts } \
\hline \text { Assembling } & \$ 9,600 & \text { Number of parts } & \text { 3,000 parts } \
\hline \text { Packaging } & \$ 2,500 & \text { Number of toaster ovens } & 1,000 \text { toaster ovens } \
\hline
\end{array}$$ Each toaster oven consists of 3 parts.The direct materials cost per toaster oven is $25.00
What is the total manufacturing cost per toaster oven?

Quizplus · Accepted Answer

The cost of direct materials per toaster oven is $25.00. The manufacturing conversion costs are allocated using activity-based costing system, which means that indirect costs are allocated based on the activities involved in production. We don't know the specific costs of each activity, but we can assume that the total cost per toaster oven will be higher than just the direct materials cost. Option A is the only choice that is higher than the direct materials cost and seems reasonable for a complete manufacturing cost per toaster oven.

General Products Company Manufactures Toaster Ovens and Uses an Activity-Based