Contour Company manufactures pillows using advanced robotics

Contour Company manufactures pillows using advanced robotics. There is no direct labor involved. Contour uses an activity-based costing system to allocate overhead costs. Contour expects to produce 2000 pillows in June. Each pillow consists of 3 parts. Additional data for the month of June follows Estimated total activity 6,000 parts 6,000 parts 2,000 pillows Estimated overhead costs Allocation base Activity Number of parts Number of parts Number of pillows Materials handling $6,600 $4,000 Packaging The total direct materials cost per pillow is $6 and the total manufacturing cost per pillow is $12.80. What are the total estimated overhead costs related to the materials handling activity for the month of June? $15,000 $7,000 $6,400 $3,000 None of the above

Solution

Correct answe is option D.$3,000

Calculation of total estimated overhead cost ralated to material handling activity.

Let the  total estimated overhead cost ralated to material handling activity be \'x\'

12.80=[(x/6000)*3] +[6600/6000*3]+[4000/2000]+6

12.80=[x/6000*3]+3.3+2+6

1.5=x/6000*3

.5=x/6000

x=3000