Sparrow Manufacturing Manufactures Small Parts and Uses an Activity-Based Costing

question 76

Multiple Choice

Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. $\begin{array}{|l|r|l|l|}\hline \text { Activity } & \begin{array}{l}\text { Est. Indirect Activity } \\\text { Costs }\end{array} & \text { Allocation base } & \text { Cost allocation rate } \\\hline \text { Materials } & \$ 70,000 & \text { Material moves } & \$ 2.00 / \text { move } \\\hline \text { Assembling } & \$ 240,000 & \text { Direct labor hours } & \$ 8.00 / \text { dir. labor hour } \\\hline \text { Packaging } & \$ 80,000 & \text { \# of finished units } & \$ 0.80 / \text { finished unit } \\\hline\end{array}$
The following parts were produced in October with the following information:
$\begin{array} { | l | r | r | r | r | } \hline \text { Part } & \text { \# Produced } & \text { Materials Costs } & \text { \# Moves } & \text { Dir. Labor Hrs. } \\\hline \text { A } & 2,500 & \$ 2,500 & 800 & 200 \\\hline \text { B } & 3,500 & \$ 7,000 & 1,500 & 300 \\\hline \text { C } & 4,500 & \$ 11,250 & 2,200 & 1,000 \\\hline\end{array}$
- Total manufacturing costs for part A is:

• A)$ 7,700.
• B)$ 3,200.
• C)$ 5,200.
• D)$ 5,700.

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Definitions:

Institutional Buyers

Large entities such as mutual funds, pension funds, and insurance companies that purchase securities in substantial volumes.

Intermediate-skill Players

Intermediate-skill players are individuals who have moved beyond beginner level in a certain domain, possessing a moderate level of skill and understanding, often seeking to improve toward advanced levels.

Break-even Chart

A graphical representation that shows when a business's costs will be exactly covered by its income.

Variable Costs

Costs that vary directly with the level of production or sales, such as materials and labor costs.