question archive Indianapolis Auto Parts (IAP) has a Seat Assembly Department that uses activity-based costing
Indianapolis Auto Parts (IAP) has a Seat Assembly Department that uses activity-based costing
Subject:AccountingPrice:3.87 Bought7
Indianapolis Auto Parts (IAP) has a Seat Assembly Department that uses activity-based costing. IAP system has the following estimated activities for the year:
Activity Cost
Allocation Base
Total
Purchasing $10,000
# of Purchase Orders
Assembling 610,000
# of Parts
Packaging 50,000
# of Finished Seats
IAP makes two models of seats with the following information:
Luxury Model Base Model
Number of Total Finished Seats
22,000 28,000
Number of Total Purchase Orders
120 80
Number of Parts per seat
20 35
Direct Materials Cost per seat
$10 $15
Direct Labor Cost per seat
$8 $10
Suppose an automobile manufacturer has asked IAP for a bid on 25,000 Luxury Model seats. To fill this order IAP would need 100 purchase orders.
Calculate the activity rates for IAP.
Calculate the Average Cost Per Seat for the order.
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Answer:
| Calcuation of the activity rates for IAP | |||||||
| Activites | Allocation bases | Activity cost ($) | Quantity in numbers | Rates ($)(Activity cost/Quantity) per Unit | |||
| 1. Purchasing | No. of purchases orders | $10,000 | 200 | 50 | |||
| 2. Assembly | No. of parts | $610,000 | 55 | 11,091 | |||
| 3. Packaging | No. of finished seats | $50,000 | 50000 | 1 | |||
| Calcuation of average cost per seat for the order | |||||||
| Total cost | Luxury Model | Base Model | |||||
| Direct materials | $220,000 (22000 seats at rate of $10 per seat) | $4,20,000 (28,000x$15) | |||||
| Direct Labour | $176,000 (22000 seats at rate of $8 per seat) | $280,000 (28000 seats at rate of $10 per seat) | |||||
| Purchasing | $6000 (120 purcahses oders at the rate of $50 per order) | $4000 (80 purchases orders at the rate of $50 per order) | |||||
| Assembling | $221,820 (20 parts at the rate of $11,091) | $388,185 (35 parts at rate of $11,091) | |||||
| Packaging | $22,000 ( 22000 seats at the rate of $1) | $28,000 ( 28000 seats at the rate of $ 1 per seat) | |||||
| Total cost | $645,820 | $1,120,185 | |||||
| No. of finished seats | 22,000 seats | 28,000 seats | |||||
| Cost per seat | $29.35 ($645,820/22000 seats) | $40.00 ( $1,120,185/28,000 seats) |
For any clarification/ assistance feel free to appraoch. An Upvote is appreciated.
