Cool Appliance manufactures three types
of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based
costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related
cost driver is identified below.

Activity

Cost

Cost Driver

Material handling

$ 225,000

Number of parts

Material insertion

2,475,000

Number of parts

Automated machinery

840,000

Machine hours

Finishing

170,000

Direct labor hours

Packaging

170,000

Orders shipped

Total

$3,880,000

The following information pertains to
the three product lines for next year:

Economy

Standard

Deluxe

Units to be produced

10,000

5,000

2,000

Orders to be shipped

1,000

500

200

Number of parts per unit

10

15

25

Machine hours per unit

1

3

5

Labor hours per unit

2

2

2

7. What is Cool Appliance’s cost application
rate for the material-handling activity?
A. $1.00 per part.
B. $2.25 per part.
C. $6.62 per labor hour.
D. $13.23 per part.
E. A rate other than those listed above.

8. What is Cool Appliance’s cost application
rate for the automated machinery activity?
A. $24.00 per machine hour.
B. $24.50 per labor hour.
C. $49.42 per unit.
D. $50.00 per machine hour.
E. A rate other than those listed above.
Cool Appliance manufactures three types
of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based
costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related
cost driver is identified below.ActivityCostCost DriverMaterial handling$ 225,000Number of partsMaterial insertion2,475,000Number of partsAutomated machinery840,000Machine hoursFinishing170,000Direct labor hoursPackaging 170,000Orders shippedTotal$3,880,000The following information pertains to
the three product lines for next year:EconomyStandardDeluxeUnits to be produced10,0005,0002,000Orders to be shipped 1,000 500 200Number of parts per unit 10 15 25Machine hours per unit 1 3 5Labor hours per unit 2 2 2 7. What is Cool Appliance’s cost application
rate for the material-handling activity? A. $1.00 per part. B. $2.25 per part. C. $6.62 per labor hour. D. $13.23 per part. E. A rate other than those listed above. 8. What is Cool Appliance’s cost application
rate for the automated machinery activity? A. $24.00 per machine hour. B. $24.50 per labor hour. C. $49.42 per unit. D. $50.00 per machine hour. E. A rate other than those listed above.