Question
Mustafa 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
Mustafa 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) | $ | 7.50 | per DLH | |
Processing batches | Number of batches | $ | 111.65 | per batch | |
Processing orders | Number of orders | $ | 86.00 | per order | |
Serving customers | Number of customers | $ | 2,737.00 | per customer | |
The cost of serving customers, $2,737.00 per customer, is the cost of serving a customer for one year. Dahle Corporation buys only one of the companys products. The details of last years purchases of this product are listed below:
Number of units purchased | 800 | units | |||
Number of batches | 16 | batches | |||
Number of orders | 4 | order | |||
Direct labor-hour requirement | 0.40 | DLHs per unit | |||
Selling price | $ | 24.25 | per unit | ||
Direct materials cost | $ | 7.45 | per unit | ||
Direct labor cost | $ | 7.85 | per unit | ||
According to the ABC system, the total cost of the activity "Supporting assembly" for this customer this past year was closest to:
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