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

question 140

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 units costs for all parts is:

• A)$ 4.34.
• B)$ 6.06.
• C)$ 7.98.
• D)$13.48.

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Definitions:

Promised Gift

A commitment to transfer ownership of an item or property to someone else without expecting something in return.

Consideration

A value promised in a contract that each party agrees to exchange, which is necessary for a valid agreement.

Liquidated Debts

Debts for which the amount owed is known and agreed upon by all parties involved.

Unliquidated Debts

Unliquidated debts refer to obligations or claims for which the exact monetary value has not been determined, often pending further assessment or legal resolution.