Answer the Following Questions Using the Information Below:
Nichols Inc

question 126

Multiple Choice

Answer the following questions using the information below:
Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:
$$\begin{array} { l r r } \text { Activities } & \text { Cost driver } & \text { Allocation Rate } \\\text { Material handling } & \text { Number of parts } & \$ 2 \text { per part } \\\text { Assembly } & \text { Labor hours } & \$ 20 \text { per hour } \\\text { Inspection } & \text { Time at inspectionstation } & \$ 3 \text { per minute }\end{array}$$ The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $200 per labor hour.
-What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts,6 direct manufacturing labor hours,and 2.5 minutes of inspection time.

• A) $4.00 per remote control
• B) $6.55 per remote control
• C) $24.00 per remote control
• D) $327.50 per remote control

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Definitions:

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