Question
Edward Company uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its
Edward Company uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries ............ $620000
Other expenses .................. $240,000
Total .................................. $860,000
Distribution of resource consumption:
Activity Cost Pools Filling Customer
Orders Support Warranty Total
Wages and Salaries 30% 60% 10% 100%
Other Expenses 45% 35% 20% 100%
The amount of activity for the year is as follows:
Activity Cost Pools Activity
Filling Orders 4800 orders
Customer Support 90 customers
Warranty 2000 items
What would be the total overhead cost per order according to the activity based costing system? In other words, what would be the overall activity rate for the filling orders activity cost pool?
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