Meester Corporation has an activity-based costing system with three activity cos

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 $78,000 Supervisory expense 2,000 Distribution of Resource Consumption Across Activity Cost Pools Activity Cont Pools Machining Order Filling Other Equipment depreciation Supervisory expense 0.40 0.50 0.10 0.10 0.50 0.40 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 Orders (Order (Machining) Pilling) Product MO Product H2 Total 1,000 9,000 600 1,400 2,000 10,000

Explanation / Answer

Calculate activity rate for the order filling cost pool :

so answer is a) $4.00 per order

Order filling Equipment depreciation 78000*10%=7800 Supervisory salaries 2000*10% = 200 Total order filling cost 8000 Order filling 2000 Activity rate 4

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