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	$162,000
Other expenses	61,000
Total	$223,000

Distribution of resource consumption:
	Activity Cost Pools
	Making Bouquets	Delivery	Other	Total
Wages and salaries	45%	25%	30%	100%
Other expenses	30%	45%	25%	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	140,308 bouquets
Delivery	12,700 deliveries

What would be the total overhead cost per delivery according to the activity based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.)

$4.92 per delivery

$6.21 per delivery

$3.64 per delivery

$5.35 per delivery

Answer 1

Toatl no. of deliveries = 12700

overhead will apportioned on each activity will be as follows -

overhead costs:	Making	Delivery	other
Wages & salaries (162000*45%),(162000*25%),(162000*30%)	72900	40500	48600
other expenses (61000*30%),(61000*45%),(61000*25%)	18300	27450	15250
Total Cost	91200	67950	63850

total overhead cost on delivery = 67950

no. of deliveries = 12700

overall activity rate for delivery activity cost pool = total overhead cost on delivery / No. of deliveries

= 67950 / 12700

= 5.35 per delivery

so the last option could be correct.

In case of any clarification required please comment.