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

question 20

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 Assembly activity? (Please round to the nearest cent.)

• A) $7.69 per machine hour
• B) $0.60 per machine hour
• C) $0.15 per machine hour
• D) $6.50 per machine hour

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