Question

Disc uses​ activity-based costing. Two of Disc​'s production activities are kitting ​(assembling the raw materials needed for each computer in one​ kit) and boxing the completed products for shipment to customers. Assume that Disc spends $ 6 comma 000 comma 000 per month on kitting and $ 18 comma 000 comma 000 per month on boxing. Disc allocates the​ following: font size increased by 1 font size increased by 1 Bold font size increased by 1 font size increased by 1 font size increased by 1 times Kitting costs based on the number of parts used in the computer font size increased by 1 font size increased by 1 Bold font size increased by 1 font size increased by 1 font size increased by 1 times Boxing costs based on the cubic feet of space the computer requires Suppose Disc estimates it will use 120 comma 000 comma 000 parts per month and ship products with a total volume of 22 comma 500 comma 000 cubic feet per month. Assume that each desktop computer requires 100 parts and has a volume of 9 cubic feet. The predetermined overhead allocation rate for kitting is ​$0.05 per part and the predetermined overhead allocation rate for boxing is ​$0.80 per cubic foot. What are the kitting and boxing costs assigned to one desktop​ computer? ​(Round all calculations to the nearest​ cent.)

Answer 1

Solution and Explanation:

The Overhead allocation rates are to be computed for determining the total cost of producing 1 unit of disc.

Total of 100 parts are used in disc . therfore, the total kitting cost per disc is ( 100 parts multiply with 0.05). Volume of cubic feet is used in one of the disc. therfore, the total boxing cost per disc is ( 9 cubic feet multiply with 0.80)

Total kitting cost per disc = $5.0

Total boxing cost per disc = $7.2

The total kitting cost and boxing cost for one desktop computer are computed by multiplying the allocation rate applicable for per unit of kitting and boxing with the total number of units needed.

Assuming the overhead rate applicable for per unit of kitting and boxing is the total cost incurred for one desktop computer.