Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 20 parts and requires 5 hours of machine time. Additional information follows:

Activity Allocation Base Cost Allocation Rate
Materials handling Number of parts $0.50 per part
Machining Machine hours $14.00 per machine hour
Assembling Number of parts $1.00 per part
Packaging Number of finished units $2.00 per finished unit

What is the cost of machining per phone?

a. $30.00
b. $42.00
c. $6.00
d. $15.00

The correct answer is $70

Explanation:

Giving the following information:

$40.00 of direct materials

includes 20 parts

requires 5 hours of machine time.

Activity (Allocation Base) - Cost Allocation Rate

Materials handling (Number of parts) - $0.50 per part

Machining (Machine hours) - $14.00 per machine hour

Assembling (Number of parts) - $1.00 per part

Packaging (Number of finished units) - $2.00 per finished unit

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Machining= 14*5hours= $70

answer; niosh, the national institute for occupational safety and health;