RitzCompany sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:

Cost PoolTotal CostsCost Driver Annual Activity

Packaging and shipping $165,000 Number of boxes shipped 24,300boxes

Final inspection $201,200 Number of individual items shipped 96,600 items

General Operations and supervision $83,700 Number of orders9,600 orders

During the period, the Far East sales office generated659 orders for a total of6,130 items. These orders were shipped in1,378 boxes. What amount of shipping department costs should be allocated to these sales?

STEPS TO SOLUTION:

1) Calculate packaging and shipping costs as: total cost / annual activity * # of boxes used.

2) Calculate Final inspection costs as: total cost / annual activity * # items in shipment.

3) Calculate general operations cost as: total cost / annual activity * # of orders.

4) Add