Bennette Corporation has provided the following data concerning its overhead cos

Question

Bennette Corporation has provided the following data concerning its overhead costs for the coming year:

The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:

The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.

The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Order Processing activity cost pool is closest to:

Wages and salaries $ 440,000 Depreciation 170,000 Rent 190,000 Total $ 800,000

Explanation / Answer

Activity Rate = Total Overhead / Number of Orders

= $ 291,500 /550 Orders

= $ 530 Per order

Hence the correct answer is $ 530 per order.

Note :

1. Overhead Cost 2. Order Processing Cost Allocated (1.*2.) Wages and salaries 440,000 40% 176,000 Depreciation 170,000 40% 68,000 Rent 190,000 25% 47,500 Total Cost 291,500

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