Question

Cuddles, Inc. manufactures two products: teddy bears and dolls. Cuddles makes 3,000 teddy bears each month. Each teddy bear uses $3.00 in direct materials and $1.50 in direct labor. Cuddles uses two activities in manufacturing that are assigned as indirect costs: Sewing and Processing. The Sewing activity cost is $15,000 a month, allocated on the basis of direct labor hours. Teddy bears use half of the direct labor hours. The Processing activity costs are allocated on the basis of batches. Teddy bears use 60% of total batches. If total manufacturing costs for one teddy bear is $11.00, what is the monthly cost associated with Processing for Cuddles? (Assume estimated and actual costs are the same each month, as are estimated and actual production levels.)  

Answer 1