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Question 2 1 pts Chuck's Guitar makes Traditional acoustic guitars and Concert Quality guitars. Both use essentially the same manufacturing processes: 1. A guitar neck is cut to shape from a wooden blank using an automated milling machine and enters the assembly area. Not the focus of this problem.) Plywood is cut in shapes that will ultimately form the figure-8-shaped box. Both guitar types use the same amount of plywood and are cut in the same way in this activity, but the Concert Quality guitar uses much higher quality plywood that is purchased in smaller quantities. 3. The cut plywood is shaped and glued into the traditional figure-8-shaped box, and the neck is added. The assembled guitar is finish-sanded. 4. Assembled guitars are moved to another area for finishing. 5. After assembly processes are complete, the assembly area is set-up (cleaned) for the next batch to start production. 6. All laborers earn $10 per hour and do not work when guitars are not being made. The assembly activities typically take the same amount of labor time per guitar for both types of guitar (about one labor hour per guitar.) Expected annual indirect costs for assembly activities. Assembly Activities include cutting the plywood for the box, shaping, gluing, attaching the milled neck, and sanding. Activities Plywood purchasing $2,400 Plywood cutting $6,000 Shape, Glue and Sand Guitar $18,000 Setup of assembly area $2,100 Total $28,500 Other information expected for the year Traditional Concert Quality 400 Annual Production 200 guitars guitars Quantity of Wooden Blanks Milled 408 blanks 206 blanks Milling Machine Hours 204 hours 154.5 hours Batch size for production 40 guitars 20 guitars Total Number of Plywood Purchase Orders 15 orders 25 orders Total Direct Labor Hours @ 10/hr. (activities do not include Direct labor 400 hours 200 hours costs) Total Direct Materials/guitar $56 each $80 each Using the given cost drivers, calculate the application rate for each of the following costs using ABC: Activity Cost Driver Cost Driver Rate Plywood purchasing $2,400 # of Purchase Orders Plywood cutting $6,000 # of Guitars Shape, Glue and Sand Guitar $18,000 # of Guitars Setup of Production area $2,100 # of Setups Calculate the cost of a Concert Guitar that completes the assembly activity using ABC. Assume that the direct materials costs includes all costs of a neck passed from the milling operation. O a) $52.75 b) $71.38 c) $142.75 d) $90.00 e) $42.75

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