DelauderEnterprises makes a variety of products that it sells to other businesse

Question

DelauderEnterprises makes a variety of products that it sells to other businesses. The company’s activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: Activity Cost Pool Activity Measure Activity Rate Supporting assembly Direct labor-hours (DLHs) $ 3.45 per DLH Processing batches Number of batches $ 193.30 per batch Processing orders Number of orders $ 83.05 per order Serving customers Number of customers $ 1,608.00 per customer The cost of serving customers, $1,608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the company’s products. The details of last year’s purchases of this product are listed below: Number of units purchased 1,500 units Number of batches 5 batches Number of orders 2 orders Direct labor-hour requirement 0.25 DLHs per unit Selling price $ 18.55 per unit Direct materials cost $ 8.35 per unit Direct labor cost $ 3.95 per unit According to the ABC system, the total overhead cost for this customer this past year was closest to:

$4,034.35

$22,484.35

$2,426.35

$18,450.00

Explanation / Answer

Supporting assembly 1293.75 =1500*0.25*3.45 Processing batches 966.5 =5*193.3 Processing orders 166.1 =2*83.05 Serving customers 1608 Total 4034.35 Option 1 is correct

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