Kenney Company Uses Activity-Based Costing to Account for Its Manufacturing

question 128

Multiple Choice

Kenney Company uses activity-based costing to account for its manufacturing process. Kenney Company produces tires and each tire has $.50 of direct materials, includes 20 parts and requires 2 hours of machine time. There is no direct labor. Additional information follows:
$\begin{array}{|l|l|r|}\hline\text { Activity }&\text { Allocation Base }&\text { Cost Allocation Rate }\\\hline \text { Materials handling } & \text { Number of parts } & \$ .16\\\hline \text { Machining } & \text { Machine hours } & \$ 14.40 \\\hline \text { Assembling } & \text { Number of parts } & \$ .70\\\hline \text { Packaging } & \text { Number of finished units } & \$ 5.40\\\hline\end{array}$

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What is the cost of materials handling per tire?

• A) $5.60
• B) $16.00
• C) $1.60
• D) $3.20

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Definitions:

Good Y

Refers to a hypothetical product or commodity used in economic models and theories to analyze market behaviors and consumer preferences.

Units

Refers to a single, distinct item or entity that is part of a larger quantity, often used in the context of measurement or count.

Utility Function

A mathematical representation that ranks an individual's preference for different combinations of goods or outcomes.

Budget Constraint

The limit on the consumption bundles that a consumer can afford to purchase, based on their income and the prices of goods and services.