Orlando Avionics Makes Three Types of Radios for Small Aircraft-Model

question 143

Multiple Choice

Orlando Avionics makes three types of radios for small aircraft-model A, model B, and model C. The manufacturing operations are mechanized and there is no direct labor. Manufacturing overhead costs are significant, and Orlando has adopted an activity-based costing system. Direct materials costs per unit for each model are as follows:
Model A $28
Model B $32
Model C $40
Orlando has three activities-assembly, materials management, and testing. The cost driver for assembly is machine hours. The cost driver for materials management is number of parts, and the cost driver for testing is the number of units of product. Total costs and production volumes for the year 2012 were estimated as follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Total cost } & { \text { Total units } } & \\\hline \text { Assembly } & \$ 780,000 & 120,000 & \text { Machine hours } \\\hline \text { Materials management } & \$ 120,000 & 80,000 & \text { Parts } \\\hline \text { Testing } & \$ 22,500 & 5,000 & \text { Units } \\\hline\end{array}$$
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What is the allocation rate for the materials management activity? (Please round to the nearest cent.)

• A) $0.67 per part
• B) $1.50 per part
• C) $0.15 per part
• D) $6.00 per part

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Definitions:

Noncontributory Plan

A type of pension plan or benefit program where the employer fully funds the benefits without required contributions from the employees.

Pension Reform Act

Legislation aimed at improving, modifying, or reforming the guidelines and operations of pension schemes and retirement benefits.

Net Periodic Pension Cost

The total cost charged to expense related to pension plans during a certain period, including service and interest costs.

Defined Benefit Pension Plan

A defined benefit pension plan is a retirement plan where the employer promises a specified pension payment upon retirement, based on an algorithm involving salary, age, and years of service.