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Problem - The Niehbur Manufacturing Company in Hondo, Texas, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:
Direct materials cost
$81.00
Activity costs allocated
?
Manufacturing product cost
The activities required to build the component follow.
Activity
Allocation Base
Cost Allocated to Each Unit
Start Station
Number of Row Component Chassis
2 x $ 1.30 =$ 2.60
Dip Station
Number of Dip Insertions
? x $ 0.40=12.00
Manual Insertion
Number of Manual insertions
12 x $ 0.80 = ?
Wave Solder
Number of Components Soldered
1 x $ 1.60 = 1.60
Backload
Number of Backload Insertions
7 x $ ?= 4.20
Test
Testing Hours
0.40 x $80.00 = ?
Defect Analysis
Defect Analysis Hours
0.10 x $? = 5.00
Total
$?
Requirements
1. Fill in the blanks in both the opening schedule and the list of activities.
2. How is labor cost assigned to products under this ABC product costing system?
3. Why might managers favor this ABC system instead of Niehbur's older system, which allocated all conversion costs on the basis of direct labor?
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