Question

QUESTION 19 Baxter Associates is an accounting firm that uses an activity-based costing system. Baxter has developed the following activity pool cost rates: Activity Activity rate Audit testing $ 75 Per hour of staff time Tax Planning $250 Per hour of partner time Report Preparation $ 45 Per report Cost and activity data related to two clients is as follows: Client 867 Client 928 20 85 Number of staff hours Number of partner hours Number of reports 15 20 10 27 How much overhead cost would be allocated to Client 867 using the activity-based costing system? A. $ 5,700 ck Save and Submit to save and submit. Click Save All Answers to save all answers. Save Al

Answer 1

Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Using the Activity based costing, Total cost would be allocated to Client 867 is $5700.

Calculations Table as per following

Activity	Cost Driver	Activity Rate Per Unit	Activity Time	Activity Cost
Client 867	Client 928	Client 867	Client 928
Audit Testing	Number of Staff Hours	$75	20	85	$1,500	$6,375
Tax Planning	Number of Partner Hours	$250	15	20	$3,750	$5,000
Report Preperation	Number of Reports	$45	10	27	$450	$1,215
Total					$5,700	$12,590