Answer the following questions using the information below:

Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate

for allocating manufacturing overhead. The plant manager is considering switching-over to

ABC costing system and has asked the accounting department to identify the primary

production activities and their cost drivers which are as follows:

Activities Cost driver Allocation Rate

Material handling Number of parts $2 per part

Assembly Labor hours $20 per hour

Inspection Time at inspection station $3 per minute

The current traditional cost method allocates overhead based on direct manufacturing

labor hours using a rate of $200 per labor hour.

1) Nichols' management is considering to implement ABC system because ________.

2) What are the indirect manufacturing costs per remote control assuming an activity-

based-costing method is used and a batch of 50 remote controls are produced? The batch

requires 100 parts, 6 direct manufacturing labor hours, and 2.5 minutes of inspection time.

3) What are the indirect manufacturing costs per remote control assuming an activity-

based-costing method is used and a batch of 100 remote controls are produced? The batch

requires 450 parts, 8 direct manufacturing labor hours, and 10 minutes of inspection time.

Answer the following questions using the information below:

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance

Department costs of $300,000 are allocated on the basis of budgeted maintenance-hours.

Personnel Department costs of $100,000 are allocated based on the number of employees.

The costs of operating departments A and B are $160,000 and $240,000, respectively. Data

on budgeted maintenance-hours and number of employees are as follows:

Support Departments

Production

Departments

Maintenanc

e

Department

Personnel

Department A B

Budgeted costs $300,000 $100,000 $160,00

0

$240,00

0

Budgeted maintenance-

hours

NA 800 1,200 600

Number of employees 50 NA 200 600

4) Using the direct method, what amount of Maintenance Department costs will be

allocated to Department B?

A) $96,000

B) $100,000

C) $110,000

D) $122,000