Question

Bennette Corporation has provided the following data concerning its overhead costs for the coming year: Wages and salaries Depreciation Rent $420,000 160,000 180,000 $760,000 Total 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 Assembly Order processing Other Total Activity labor- 40,000 hours 700 orders 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: Wages and salaries Depreciation Rent Assembly 35% 15% 35% Activity Cost Pools Order Processing 30% 45% 30% Other 35% 40% 35% Total 100% 100% 100% The activity rate for the Order Processing activity cost pool is closest to:

Answer 1

Cost pool for order processing activity

= (420,000*30%) +(160,000*45%)+(180,000*30%)

= 252,000

Activity rate = Cost pool/Total activity

= 252,000/700

= 360

Option A