Question

Foster Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system: Overhead costs: Wages and salaries $ 162,000 Other expenses 61,000 Total $ 223,000 Distribution of resource consumption: Activity Cost Pools Making Bouquets Delivery Other Total Wages and salaries 45% 25% 30% 100% Other expenses 30% 45% 25% 100% The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Activity Making bouquets 140,308 bouquets Delivery 12,700 deliveries What would be the total overhead cost per delivery according to the activity based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.)

Answer 1

Answer:

$5.35 per delivery

Explanation:

Overhead costs:

Wages and salaries $162,000

Other expenses $61,000

Total $223,000

Activity Cost Pools     Wages and salaries       Other expenses

Making Bouquets            45%                                30%

Delivery                            25%                                45%

Other                                30%                                25%

Total                                100%                              100%

Activity Cost Pool Activity

Making bouquets 140,308 bouquets

Delivery 12,700 deliveries

total overhead costs assigned to delivery:

Wages and salaries $162,000 x 25% = $40,500

Other expenses $61,000 x 45% = $27,450

total = $67,950

cost per delivery = $67,950 / 12,700 deliveries = $5.35 per delivery

Answer 2

The overall activity rate for the deliveries activity cost pool $5.35 per delivery .

• Overhead costs:

Wages and salaries $162,000

Other expenses $61,000

Total= $223,000

• Activity Cost Pools     Wages and salaries       Other expenses

1. Making Bouquets            45%                                30%
2. Delivery                            25%                                45%
3. Other                                30%                                25%

         Total                                100%                              100%

Activity Cost Pool Activity:

• Making bouquets 140,308 bouquets
• Delivery 12,700 deliveries

Total overhead costs assigned to delivery:

• Wages and salaries $162,000 x 25% = $40,500
• Other expenses $61,000 x 45% = $27,450
• Total = $67,950

Cost per delivery = $67,950 / 12,700 deliveries

Cost per delivery= $5.35 per delivery

The overall activity rate for the deliveries activity cost pool $5.35 per delivery .

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