Alpha Company Manufactures Breadboxes and Uses an Activity-Based Costing System

question 110

Multiple Choice

Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May: $$\begin{array} { | l | c | c | c | } \hline \text { Activity } & \begin{array} { c } \text { Estimated Indirect } \\\text { Activity Costs }\end{array} & \text { Allocation Base } & \begin{array} { c } \text { Estimated Quantity of } \\\text { Allocation Base }\end{array} \\\hline \text { Materials handling } & \$ 3,500 & \text { Number of parts } & 5,000 \text { parts } \\\hline \text { Assembling } & \$ 12,000 & \text { Number of parts } & 5,000 \text { parts } \\\hline \text { Packaging } & \$ 5,750 & \begin{array} { c } \text { Number of bread } \\\text { boxes }\end{array} & 1,250 \text { bread boxes } \\\hline\end{array}$$ Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. There is no direct labor. What is the total manufacturing cost per breadbox?

• A) $17.40
• B) $24.00
• C) $12.40
• D) $26.00

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Definitions:

Compensation Plan

A detailed plan that outlines the salary, wages, benefits, and incentives for employees, designed to motivate and reward them.

Measurement Date

The specific date at which the values of assets and liabilities are determined in the preparation of financial statements.

Stock Appreciation Rights

A type of employee compensation linked to the increase in the company's stock price over a set period, allowing employees to profit from the appreciation without owning the stock.

Compensation Expense

The total cost incurred by a business for the payment of salaries, wages, benefits, and other forms of compensation to employees.