Whirlwind Fan Company Manufactures Ceiling Fans and Uses an Activity-Based

question 217

Multiple Choice

Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct material cost is $85,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows: $$\begin{array} { | l | l | l | } \hline \text { Activity } & \text { Allocation Base } & \begin{array} { l } \text { Predetermined Overhead } \\\text { Allocation Rate }\end{array} \\\hline \text { Materials handling } & \text { Number of parts } & \$ 0.08 \\\hline \text { Machining } & \text { Machine hours } & 6.00 \\\hline \text { Assembling } & \text { Number of parts } & 0.25 \\\hline \text { Packaging } & \text { Number of finished units } & 4.00 \\\hline\end{array}$$ What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places.)

• A) $1.60
• B) $6.00
• C) $4.00
• D) $10.00

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Definitions:

Direct Write-off Method

An accounting practice where uncollectible accounts receivable are written off to expense only when they are determined to be non-recoverable.

Adjustment

An entry made in accounting records at the end of an accounting period to allocate income and expenditure to the appropriate period.

Percent of Sales Method

A financial forecasting tool used to estimate certain balance sheet and income statement accounts based on a projected sales figure.

Uncollectible Accounts

Accounts receivable that are considered unlikely to be collected and are written off as a bad debt expense.