Nichols Inc. manufactures remote controls. Currently, the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:
Activities Cost driver Allocation Rate
Material handling Number of parts $8.00 per part
Assembly Labor hours $10.00 per hour
Inspection Time at inspection station $20.00 per minute
The current traditional cost method allocates overhead based on direct manufacturing labor-hours using a rate of $ 300.00 per labor hour.
What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 100 remote controls are produced?
The batch requires 400 parts, 6 direct manufacturing labor hours, and 17 minutes of inspection time.
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Nichols Inc. manufactures remote controls. Currently, the company uses a plant-wide rate for allocat...
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