Question

Fogle 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	$159,000
Other expenses	105,000
Total	$264,000

Distribution of resource consumption:
	Activity Cost Pools
	Making Bouquets	Delivery	Other	Total
Wages and salaries	50%	30%	20%	100%
Other expenses	35%	55%	10%	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 Pool	Activity
Making bouquets	101,090 bouquets
Delivery	13,400 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? (Round to the nearest whole cent.)

$1.20 per bouquets

$1.15 per bouquets

$1.05 per bouquets

$1.13 per bouquets

Answer 1

Overhead cost per boubuet

$1.15

Working:

Allocation of wages and salaries
Total amount	159000
Activity cost pools	Making	Deivery	Other
	bouquets
Distribution	50%	30%	20%
Allocation of wages	79500	47700	31800
Allocation of other expenses
Total amount	105000
Activity cost pools	Making	Deivery	Other
	bouquets
Distribution	35%	55%	10%
Allocation of wages	36750	57750	10500
Total cost for making bouquets cost pool
Wages and salaries	79500
Other expenses	36750
Totl cost	116250
Number of bouquets made	101090
Overhead cost per boubuet	$1.15