Pilkerton Enterprises makes a variety of products that it sells to other busines

ID: 2517589 • Letter: P

Question

Pilkerton Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below Activity Cost Pool Activity Measure Activity Rate Supporting assembly Processing batches Processing orders Serving customers Direct labor-hours (DLHs) Number of batches Number of orders Number of customers 2.50 per DLH $ 101.80 per batch $ 72.05 per order $2,533.00 per customer The cost of serving customers. $2,533.00 per customer, is the cost of serving a customer for one year. Christoforou Corporation buys only one of the company's products which Pilkerton Enterprises sells for $21.65 per unit. Last year Christoforou Corporation ordered a total of 1,300 units of this product in 3 orders. To fill the orders, 10 batches were required. The direct materials cost is $6.60 per unit and the direct labor cost is $2.75 per unit. Each unit requires 0.15 DLHs. According to the ABC system, the total overhead cost for this customer this past year was closest to:

Explanation / Answer

Solution:

Activity

USAGE OF ACTIVITY

Activity Rate (B)

Applied Overhead to Customer (A*B)

Supporting Assembly

195

Direct Labor Hours

$2.50

$487.50

Processing Batches

Batches

$101.80

$1,018.00

Processing Orders

orders

$72.05

$216.15

Serving Customers

Customer

$2,533.00

TOTAL APPLIED OVERHEADS

$1,721.65

Hence, the correct option is $1,721.65

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you