Question

Meester 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 $ 78,200
Supervisory expense $ 6,500
Distribution of Resource Consumption Across Activity Cost Pools:

Activity Cost Pools
Machining Order Filling Other
Equipment depreciation 0.50 0.30 0.20
Supervisory expense 0.50 0.20 0.30
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) Orders (Order Filling)
Product M0 1,090 1,220
Product H2 9,410 1,640
Total 10,500 2,860
The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

Multiple Choice

a.$86.60 per order

b.$5.66 per order

c.$6.09 per order

d.$8.66 per order

Answer 1

Answer:

d.$8.66 per order

Explanation:

Meester Corporation\

Given

Activity:

                    MHs (Machining)           Orders (Order Filling)

Product M0         1,090                                1,220

Product H2           9,410                               1,640

Total                    10,500                               2,860

Activity Cost Pools

                                   Machining      Order Filling            Other

Equipment depreciation 0.50           0.30                          0.20

Supervisory expense       0.50           0.20                        0.30

Overhead costs:

Equipment depreciation $ 78,200

Supervisory expense $ 6,500

Calculated

We find the cost of each activity by multiplying the cost driveror cost pool to the corresponding overhead.

Overhead * Activity Cost Pool= Activity Cost

Order Filling Cost  Equipment depreciation= 78,200 *0.3- 23460

Order Filling Cost  Supervisory expense=$ 6,500*0.2= 1300

Activity Cost

                                   Machining      Order Filling          

Equipment depreciation 39100           23460                        

Supervisory expense       3250              1300              

Total                                 42350             24760

Total Order Filling $ 24760

Total Order 2860

Cost per Order= $ 24760/2860=  8.657= $ 8.66 per Order