Two of Compute It’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 Compute It spends $12,000,000 a month on kitting and $22,000,000 a month on boxing. Compute It allocates the following:
?Kitting costs based on the number of parts used in the computer
?Boxing costs based on the cubic feet of space the computer requires
Suppose Compute It estimates it will use 400,000,000 parts a month and ship products with a total volume of 20,000,000 cubic feet. Assume that each desktop computer requires 125 parts and has a volume of 10 cubic feet. What is the activity cost allocation rate?
|
|
Kitting |
Boxing |
|
a. |
$0.03/part |
$0.05/cubic foot |
|
b. |
$0.60/part |
$0.06/cubic foot |
|
c. |
$0.03/part |
$1.10/cubic foot |
|
d. |
$33.33/part |
$0.91/cubic foot |