Calculation Of Activity Rate For Order Filling Activity

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Question

Capizzi Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Overhead costs:
Equipment depreciation	$87,500
Supervisory expense	$9,900

Distribution of Resource Consumption Across Activity Cost Pools:
	Activity Cost Pools
	Machining	Order Filling	Other
Equipment depreciation	0.60	0.30	0.10
Supervisory expense	0.60	0.20	0.20

Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:

Activity:
	MHs (Machining)	Batches (Order Filling)
Product Y7	1,820	910
Product V2	9,500	1,920
Total	11,320	2,830

The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

a. $99.80 per order

b. $6.98 per order

c. $7.41 per order

d. $9.98 per order

Summary

The question belongs to Accounting and it discusses about calculation of activity rate for order filling activity.

Total Word Count 30

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