Friday, 26 September 2014

Escher Company is a wholesale distributor that uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

Escher Company is a wholesale distributor that uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

  Overhead costs:  
  Wages and salaries $552,000  
  Other expenses
220,000  
  Total
$772,000  

Distribution of resource consumption
 
Activity Cost Pools
  Filling
Orders
Customer
Support
Other Total
  Wages and salaries 40%     55%     5%     100%    
  Other expenses 50%     45%     5%     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
  Filling orders 5,400    orders
  Customer support 22    customers

What would be the total overhead cost per order according to the activity based costing system? In otherwords, what would be the overall activity rate for the filling orders activity cost pool?
$63.26
correct $61.26
$58.76
$67.76