Question

Bennette Corporation has provided the following data concerning its overhead costs for the coming year Wages and salaries Depreciation Rent Total $410,000 155,000 175,000 $ 740,000 The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year. Activity Cost Pool Total Activity labor- Assembly 35,000 hours Order processing 350 orders Other Not applicable 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. Activity Cost Pools Assembly Order Processing Other 450 300 258 Wages and salaries Depreciation Rent Total 1008 1008 1001 500 The activity rate for the Order Processing activity cost pool is closest to Multiple Choice $595 per order O $585 per order Oo oo $470 per order O $605 per order

Answer 1

Overhead cost	Overhead cost amount	Activity cost pool percentage of order processing	Overhead cost allocated
Wages and salaries	410,000	25%	410,000 x 25% = 102,500
Depreciation	155,000	40%	155,000 x 40% = 62,000
Rent	175,000	25%	175,000 x 25% = 43,750
Total			$208,250

Activity rate for order processing activity cost pool = Overhead cost allocated to order processing/Number of orders

= 208,250/350

= $595 per order

First option is correct

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