{"id":180461,"date":"2025-01-06T13:59:59","date_gmt":"2025-01-06T13:59:59","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=180461"},"modified":"2025-01-06T14:00:02","modified_gmt":"2025-01-06T14:00:02","slug":"alpha-company-manufactures-breadboxes-and-uses-an-activity-based-costing-system-to-allocate-all-manufacturing-conversion-costs","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/01\/06\/alpha-company-manufactures-breadboxes-and-uses-an-activity-based-costing-system-to-allocate-all-manufacturing-conversion-costs\/","title":{"rendered":"Alpha Company manufactures breadboxes and uses an activity-based costing system to allocate all manufacturing conversion costs"},"content":{"rendered":"\n

Alpha Company manufactures breadboxes and uses an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of May: Activity Estd Indirect Activity Costs Allocation Base | Estimated Allocation Base Materials handling $ 3,500 Number of parts 5,000 parts Assembling 12,000 Number of parts 5,000 parts Packaging 5,750 | Number of bread boxes 1,250 bread boxes<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Each breadbox consists of 4 parts. The direct materials cost per breadbox is $9.00<\/p>\n\n\n\n

What is the total manufacturing cost per breadbox?<\/p>\n\n\n\n

A. $12.40 B. $17.40 C. $24.00 D. $26.00 E. None<\/p>\n\n\n\n

The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n

To calculate the total manufacturing cost per breadbox<\/strong>, we must include the direct materials cost and the allocated activity costs based on activity-based costing (ABC). Let\u2019s go step by step.<\/p>\n\n\n\n

Step 1: Calculate Total Allocation Base for Each Activity<\/h3>\n\n\n\n
    \n
  1. Materials handling<\/strong>:
    Allocation rate = Estimated cost \/ Allocation base = ( \\frac{3500}{5000} = \\$0.70 ) per part.
    Each breadbox has 4 parts, so total parts for 1,250 breadboxes = ( 1,250 \\times 4 = 5,000 ) parts.<\/li>\n\n\n\n
  2. Assembling<\/strong>:
    Allocation rate = Estimated cost \/ Allocation base = ( \\frac{12,000}{5000} = \\$2.40 ) per part.
    Total parts = 5,000 (same as above).<\/li>\n\n\n\n
  3. Packaging<\/strong>:
    Allocation rate = Estimated cost \/ Allocation base = ( \\frac{5750}{1250} = \\$4.60 ) per breadbox.<\/li>\n<\/ol>\n\n\n\n

    Step 2: Compute Allocated Costs per Breadbox<\/h3>\n\n\n\n
      \n
    1. Materials handling cost per breadbox<\/strong>:
      ( 4 \\, \\text{parts per breadbox} \\times 0.70 \\, \\text{(rate per part)} = \\$2.80 ).<\/li>\n\n\n\n
    2. Assembling cost per breadbox<\/strong>:
      ( 4 \\, \\text{parts per breadbox} \\times 2.40 \\, \\text{(rate per part)} = \\$9.60 ).<\/li>\n\n\n\n
    3. Packaging cost per breadbox<\/strong>:
      Direct allocation = ( 4.60 \\, \\text{(rate per breadbox)} ).<\/li>\n<\/ol>\n\n\n\n

      Step 3: Add Direct Material Costs<\/h3>\n\n\n\n

      Direct material cost per breadbox = ( 9.00 ).<\/p>\n\n\n\n

      Step 4: Total Cost per Breadbox<\/h3>\n\n\n\n

      ( 2.80 \\, \\text{(materials handling)} + 9.60 \\, \\text{(assembling)} + 4.60 \\, \\text{(packaging)} + 9.00 \\, \\text{(direct materials)} = 26.00 ).<\/p>\n\n\n\n

      Final Answer: D. $26.00<\/strong><\/h3>\n\n\n\n
      \n\n\n\n

      Explanation:<\/h3>\n\n\n\n

      Activity-based costing ensures accurate allocation by assigning indirect costs based on specific cost drivers (e.g., parts and breadboxes). In this case:<\/p>\n\n\n\n

        \n
      1. The direct materials cost forms a substantial part of the total cost.<\/li>\n\n\n\n
      2. Activity rates are multiplied by the relevant allocation base (number of parts or breadboxes) for precision.<\/li>\n\n\n\n
      3. Adding these costs together gives a comprehensive view of the per-unit manufacturing cost.<\/li>\n<\/ol>\n\n\n\n

        Thus, the manufacturing cost per breadbox is $26.00<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

        Alpha Company manufactures breadboxes and uses an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of May: Activity Estd Indirect Activity Costs Allocation Base | Estimated Allocation Base Materials handling $ 3,500 Number of parts 5,000 parts Assembling 12,000 Number of parts 5,000 parts Packaging 5,750 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-180461","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/180461","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=180461"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/180461\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=180461"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=180461"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=180461"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}