Question

Leaper Corporation uses an activity-based costing system with the following three activity cost pools: Total Activity Activity Cost Pool machine- Fabrication 35,000 hours Order processing 300 orders Other Not applicable The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: Wages and salaries Depreciation $420,000 170,000 190,000 Occupancy $780,000 Total The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Order Processing Fabrication other Total Wages and salaries Depreciation 30% 25% 45% 100% 20% 50% 30% 100% 40% 35% 100% 25% Occupancy The activity rate for the Order Processing activity cost pool is closest to:

Answer 1

Calculation of cost allocation to order processing activity cost pool

Cost	Amount	Proportion	Allocation cost
Wages and salary	420,000	25%	420,000 x 25% = 105,000
Depreciation	170,000	50%	170,000 x 50% = 85,000
Occupancy	190,000	35%	190,000 x 35% = 66,500
Total cost			$256,500

Activity rate for order processing cost pool = Total cost of order processing activity cost pool/Number of order

= 256,500/300

= $855 per order

Third option is the correct option

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