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. 

a. 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. 

b. 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.  

 

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