Orlando Avionics Makes Three Types of Radios for Small Aircraft

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: $$\begin{array} { | l | l | } \hline \text { Model A } & \$ 28 \\\hline \text { Model B } & \$ 32 \\\hline \text { Model C } & \$ 40 \\\hline\end{array}$$ 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 2015 were estimated as follows:
$$\begin{array} { | l | c | c | c | } \hline & \text { Total cost } & \text { Total units } & \text { Cost Driver } \\\hline \text { Assembly } & \$ 780,000 & 120,000 & \text { Machine hours } \\\hline \text { Materials management } & \$ 120,000 & 80,000 & \text { Parts } \\\hline \text { Testing } & \$ 22,500 & 5,000 & \text { Units } \\\hline\end{array}$$ The Model A radio requires 12 parts to construct, and requires 16 machine hours of processing. What is the manufacturing cost to make one unit of Model A?

• A) $150.00
• B) $132.00
• C) $126.50
• D) $154.50

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