Indirect costs - Management Accounting?

Question

I'm having trouble with this question by second guessing myself.

Assume that a batch of 1000 carving knives requires 2000 parts ($4/part), 20 direct manufacturing labour hrs (($40 /hr), and 30 mins of inspection time ($6 per min).

What are the indirect manufacturing costs per carving knife to produce a batch of 1000 carving knives, assuming the previous plant-wide allocation rate method is used ( previous method was allocation rate of $400 per labour-hour)?

As far as I can see it seems simple...indirect costs do not include direct - so direct labour is out of the question, therefore it should only be 2000 parts x $4 per part = $8000/1000 parts or $8 per unit. Do you agree or disagree? I'm unsure how the inspection would be reflected? This is multiple choice...the answers are a)$8.00 b)$9.80 c)$8000 d)$9800.

Thanks for any help...i think i may be overthinking this one!

Answer 1

This is similar to your other question. The parts is also a direct cost, Direct Material. It should be excluded.

Indirect is only the inspection time. From the problem it reads as if that 1000 carving knives only need inspection times of 30 mins. That would means 30 x 6 = $180 or per 1000 knives would be $0.18.