Question
Spidero Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs
Spidero Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity-based costing system: Overhead costs: Wages and salaries, $70,000; Other expenses, $60,000; Total, $130,000.
Distribution of resource consumption:
Activity Cost PoolsMaking BouquetsDeliveryOtherTotalWages and salaries70%20%10%100%Other expenses45%25%30%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 PoolActivityMaking bouquets40,000 bouquetsDelivery4,000 deliveries
What would be the total overhead cost per bouquet according to the activity-based costing system? In other words, what would be the overall activity rate for the making bouquets activity cost pool?
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