The Manoli Company Has Collected the Following Data for Use

question 23

Multiple Choice

The Manoli Company has collected the following data for use in calculating product costs: Activity Data: (expected and actual) $$\begin{array} { | l | l | l | l | } \hline & \text { Rug Cleaners } & { \text { Sweepers } } & \text { T otal } \\\hline \text { Units Produced } & 50,000 & 250,000 & 300,000 \\\hline \text { Prime Costs } & \$ 200,000 & \$ 750,000 & \$ 950,000 \\\hline \text { Direct Labor Hours } & 10,000 & 40,000 & 50,000 \\\hline \text { Machine Hours } & 20,000 & 10,000 & 30,000 \\\hline \text { Number of Setups } & 25 & 75 & 100 \\\hline \text { Inspection Hours } & 1200 & 2,800 & 4,000 \\\hline \text { Number of Moves } & 140 & 210 & 350 \\\hline\end{array}$$
Departmental Data: (expected and actual) $$\begin{array} { | l | l | l | l| } \hline & { \text { Molding } } & \text { Assembly } & { \text { Total } } \\\hline \text { Direct Labor Hours } & & & \\\hline \text { Rug Cleaners } & 5,000 & 5,000 & 10,000 \\\hline \text { Sweepers } & & & \\\hline \text { Total } & 10,000 & 40,000 & 50,000 \\\hline \text { Machine Hours } & & & \\\hline \text { Rug Cleaners } & 17,000 & 3,000 &20,000 \\\hline \text { Sweepers } & 3,000 & 7,000 & 10,000\\\hline \text { Total } & 20,000 & 10,000 & 30,000 \\\hline \text { Overhead Costs } & & & \\\hline \text { Machining } & \$ 120,000 & \$ 30,000 & \$ 150,000 \\\hline \text { Moving Materials } & 40,000 & 30,000 &70,000\\\hline { \text { Setting Up } } & 70,000 & 10,000 & 80,000 \\\hline \text { Inspecting Products } & 20,000 & 30,000 & 50,000 \\\hline \text { Total } & \$ 250,000 & \$ 100,000 &\$350,000 \\\hline\end{array}$$
What is the unit product cost for rug cleaners using activity based costing?

• A)$11.00
• B)$ 7.26
• C)$ 4.00
• D)$ 3.75

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated amount of accounts receivable that may not be collected.

Aging of Accounts Receivable

A method used to estimate the collectability of accounts receivable by categorizing them according to the length of time an invoice has been outstanding.

Credit Sales

Credit Sales are transactions in which goods or services are provided to customers with the understanding that payment will be made at a later date.

Credit Cards

Financial instruments issued by banks or financial institutions allowing cardholders to borrow funds at the point of sale, subject to repayment terms and interest rates.