Borderbooks Company uses activity-based costing. The company produces soft and h

Question

Borderbooks Company uses activity-based costing. The company produces soft and hard-cover books. The estimated costs and expected activity for each of the                    activity pools follow:

                    Activity Estimated Expected Activity
Cost Pool Cost Hard-Cover Soft-Cover Total
                    Activity 1 $15,675 800 300 1,100
                    Activity 2 $11,900 500 200 700
                    Activity 3 $27,600 800 400 1,200

Total cost which would be charged to hard cover books would be

Explanation / Answer

Formula for Each Cost = (Total Cost of The Activity*Cost of the required Sub Activity)/Sum of Per unit costs of all Sub Activities

Here Hard-Cover and Soft-Cover are sub Activities

Cost Pool Cost Hard-Cover Soft-Cover Total Cost Hard-Cover Activity 1 800 300 1,100 15675 800 300 1100 11400 Activity 2 11900 500 200 700 8500 Activity 3 27600 800 400 1200 18400 Total Cost for Hard Cover 38300

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