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

question 103

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 C is:

• A)$ 27,250.
• B)$ 16,000.
• C)$ 23,650.
• D)$ 12,400.

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Definitions:

Increase Sales

An objective of businesses aimed at growing the number of products sold or services rendered.

Cartel Agreement

A formal, explicit agreement among competing firms to control prices, production, and market shares.

Cartelized Market

A market condition where a few suppliers act together to control prices or limit market competition.

Oligopoly

A market structure dominated by a small number of large firms, leading to limited competition and potentially higher prices for consumers.