Second-Stage Allocation to an Order [LO4]

Transvaal Mining Tools Ltd. of South Africa makes specialty tools used in the mining industry.

The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below:

The managing director of the company would like information concerning the cost of a recently completed order for hard-rock drills. The order required 150 direct labor-hours, 18 hours of product testing, and three sales calls.
Required:
Prepare a report summarizing the overhead costs assigned to the order for hard-rock drills. What is the total overhead cost assigned to the order?

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Activity Cost Pool Order size Customer orders. Product testing. Selling. Activity Measure Number of direct labor-hours Number of customer orders Number of testing hours Number of sales calls *(The currency in South Africa is the rand, denoted here by R.) Activity Rate R17.60 per direct labor-hour* R360 per customer order R79 per testing hour R1,494 per sales call