Question

Foster Florist specializes in large floral bouquets for weddings and business parties. They are using ABC Costing and their main cost pools are making bouquets and then delivering these bouquets. They provided the following data concerning its annual overhead costs in its' activity based costing system:

Overhead costs:

Wages and salaries	$	82,000
Other expenses		74,000
Total	$	156,000

Distribution of resource consumption:

	Activity Cost Pools
	Making Bouquets	Delivery		Other	Total
Wages and salaries	45%	40%		15%	100%
Other expenses	35%	55%		10%	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	73,020	bouquets
Delivery	16,800	deliveries

What would be the total overhead cost per bouquet delivery be 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.)

Multiple Choice

• $5.24

• $4.38

• $3.95

• $2.67

Answer 1

	Delivery
Wages and salaries	32800	=82000*40%
Other expenses	40700	=74000*55%
Total overhead assigned	73500
Divide by Total deliveries	16800
Overhead cost per bouquet delivery	4.38
Option B $4.38 is correct