AJ Accounting performs two types of services, Audit and Tax. AJ\'s overhead cost

Question

AJ Accounting performs two types of services, Audit and Tax. AJ's overhead costs consist of computer support, $200,000; and legal support, $100,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Aj performs tax services for Dan morris. Direct Labor cost is $1,200; 600 CPU minutes were used: and 1 legal hour was used. WHAT is the TOTAL COST of the Morris job using ACTIVITY-BASED COSTING??

A) $2,400
B) $2,500
C) $3,600
D) $3,700

Explanation / Answer

ACTIVITY-BASED COSTING =1200+[200,000/(40,000 +10,000)]*600 + [100,000/(200+800)]*1 = 1200 + 4*600 + 100 = 1200+2400 +100 =3700$

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