Question
Larry Enterprises makes a variety of products that it sells to other businesses. The companys activity-based costing system has four activity cost pools for assigning
Larry Enterprises makes a variety of products that it sells to other businesses. The companys activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: Activity Cost Pool Activity Measure Activity Rate Supporting assembly Direct labor-hours (DLHs) $ 2.55 per DLH Processing batches Number of batches $ 138.35 per batch Processing orders Number of orders $ 77.00 per order Serving customers Number of customers $ 1,913.00 per customer The cost of serving customers, $1,913.00 per customer, is the cost of serving a customer for one year. Prosonic Corporation buys only one of the companys products. The details of last years purchases of this product are listed below: Number of units purchased 900 units Number of batches 4 batches Number of orders 1 order Direct labor-hour requirement 0.10 DLHs per unit Selling price $ 29.95 per unit Direct materials cost $ 6.40 per unit Direct labor cost $ 1.85 per unit According to the ABC system, the total cost of the activity "Processing batches" for this customer this past year was closest to: $630.40 $138.35 $77.00 $553.40
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