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Question
Quality Stereo Company has provided the following information regarding its activity-based costing system:
Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $75 per purchase order.
Assembly department costs are allocated based on the number of parts used and the cost allocation rate is $1.00 per part.
Packaging department costs are allocated based on the number of units produced and the allocation rate is $2.00 per unit produced.
Each stereo produced has 50 parts, and the direct materials cost per unit is $70. There are no direct labor costs. Quality Stereo has an order for 1,000 stereos which will require 50 purchase orders in all. What is the total cost of the 1,000 stereos?
A) $125,750
B) $55,750
C) $123,750
D) $122,000
Answer
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