Question
Pilkerton 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
Pilkerton 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) | $ | 2.50 | per DLH | |||||||
Processing batches | Number of batches | $ | 101.80 | per batch | |||||||
Processing orders | Number of orders | $ | 72.05 | per order | |||||||
Serving customers | Number of customers | $ | 2,533.00 | per customer | |||||||
The cost of serving customers, $2,533.00 per customer, is the cost of serving a customer for one year.
Christoforou Corporation buys only one of the companys products which Pilkerton Enterprises sells for $21.65 per unit. Last year Christoforou Corporation ordered a total of 1,300 units of this product in 3 orders. To fill the orders, 10 batches were required. The direct materials cost is $6.60 per unit and the direct labor cost is $2.75 per unit. Each unit requires 0.15 DLHs.
According to the ABC system, the total overhead cost for this customer this past year was closest to:
a) $12,155.00
b) $4,254.65
c) $16,409.65
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