Question
Foster Florist specializes in large floral bouquets for weddings and business parties. They are using ABC Costing and their main cost pools are making bouquets
Foster Florist specializes in large floral bouquets for weddings and business parties. They are using ABC Costing and their main cost pools are making bouquets and then delivering these bouquets. They provided the following data concerning its annual overhead costs in its' activity based costing system:
Overhead costs:
Wages and salaries | $ | 82,000 | |||||
Other expenses | 74,000 | ||||||
Total | $ | 156,000 | |||||
Distribution of resource consumption:
Activity Cost Pools | |||||
Making Bouquets | Delivery | Other | Total | ||
Wages and salaries | 45% | 40% | 15% | 100% | |
Other expenses | 35% | 55% | 10% | 100% | |
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool | Activity | ||||||
Making bouquets | 73,020 | bouquets | |||||
Delivery | 16,800 | deliveries | |||||
What would be the total overhead cost per bouquet delivery be according to the activity-based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.)
Multiple Choice
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$5.24
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$4.38
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$3.95
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$2.67
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