204. CSO: 1C2c LOS: 1C2h
Pelder Products Company manufactures two types of engineering diagnostic equipment
used in construction. The two products are based upon different technologies, x-ray and
ultra-sound, but are manufactured in the same factory. Pelder has computed the
manufacturing cost of the x-ray and ultra-sound products by adding together direct
materials, direct labor, and overhead cost applied based on the number of direct labor
hours. The factory has three overhead departments that support the single production line
that makes both products. Budgeted overhead spending for the departments is as follows.
Department
Engineering design Material handling Setup Total
$6,000 $5,000 $3,000 $14,000
Pelder’s budgeted manufacturing activities and costs for the period are as follows.
Product
75
Activity X-Ray Ultra-Sound
Units produced and sold 50 100
Direct materials used $5,000 $8,000
Direct labor hours used 100 300
Direct labor cost $4,000 $12,000
Number of parts used 400 600
Number of engineering changes 2 1
Number of product setups 8 7
The budgeted cost to manufacture one ultra-sound machine using the activity-based
costing method is
a. $225.
b. $264.
c. $293.
d. $305.
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