Agouti Legal Corp, a law firm, uses an activity-based costing in which there are
ID: 2415413 • Letter: A
Question
Agouti Legal Corp, a law firm, uses an activity-based costing in which there are three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:
Costs:
Wages and salaries
$ 275,000
Travel expenses
50,000
Other expenses
125,000
Total
$ 450,000
Distribution of resource consumption:
Activity Cost Pools
Working on
Business
Engagements
Development
Other
Total
Wages and salaries
80%
15%
5%
100%
Travel expenses
75%
20%
5%
100%
Other expenses
10%
35%
55%
100%
Required:
a. How much cost, in total, would be allocated to the Working On Engagements activity cost pool?
b. How much cost, in total, would be allocated to the Business Development activity cost pool?
c. How much cost, in total, would be allocated to the Other activity cost pool?
You must show your calculations.
Wages and salaries
$ 275,000
Travel expenses
50,000
Other expenses
125,000
Total
$ 450,000
Explanation / Answer
A./ TOTAL COST ALLOCATED TO WORKING ON ENGAGEMENTS
B./ TOTAL COST ALLOCATED TO BUSINESS DEVLOPEMENT ACTIVITY
C./ TOTAL COST ALLOCATED TO OTHER ACTIVITY
WAGES & SALARIES ($275000 * 80%) $220000 TRAVELL EXPENSES ($50000 * 75%) $37500 OTHER EXPENSES ($125000 * 10%) $12500 TOTAL COST $270000