HiTech Products Manufactures Three Types of Remote-Control Devices: Economy, Standard

question 57

Multiple Choice

HiTech Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers) . Each activity, its budgeted cost, and related cost driver is identified below. $\begin{array}{lrl}\text { Activity } & \text { Cost } & \text { Cost Driver }\\\text { Material handling } & \$ 225,000 & \text { Number of parts } \\\text { Material insertion } & 2,475,000 & \text { Number of parts } \\\text { Automated machinery } & 840,000 & \text { Machine hours } \\\text { Finishing } & 170,000 & \text { Direct labor hour } \\\text { Packaging } & 170,000 & \text { Orders shipped }\\\text { Total }&\$3,880,000\end{array}$ The following information pertains to the three product lines for next year: $\begin{array}{lrrr}&\text { Economy }&\text { Standard}&\text { Deluxe }\\\text { Units to be produced } & 10,000 & 5,000 & 2,000 \\\text { Orders to be shipped } & 1,000 & 500 & 200 \\\text { Number of parts per unit } & 10 & 15 & 25 \\\text { Machine hours per unit } & 1 & 3 & 5 \\\text { Labor hours per unit } & 2 & 2 & 2\end{array}$
What is HiTech's pool rate for the finishing activity?

• A) $5.00 per labor hour.
• B) $5.00 per machine hour.
• C) $5.00 per unit.
• D) $7.50 per unit.
• E) None of the other answers is correct.

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Definitions:

Yield Rate

The rate of return on an investment over a specified period, often expressed as a percentage.

Cost Schedule

A list or plan that outlines the anticipated costs involved in a project or business operation over time.

Ceramic Plates

Durable dishes made from clay that are hardened by heat, commonly used for eating, serving, and decoration purposes.

Flawed Units

items that have defects or do not meet the quality standards set by the manufacturer or industry, rendering them less valuable or unsellable.