Question

Identify Activity Bases From the following list of activity bases for an automobile dealership, select the base that would be most appropriate for each of these costs: (1) preparation costs (cleaning, oil, and gasoline costs) for each car received, (2) salespersons' commission of 5% of the sales price for each car sold, and (3) administrative costs for ordering cars. Number of cars sold Dollar amount of cars ordered Number of cars ordered Number of cars on hand Number of cars received Dollar amount of cars sold Dollar amount of cars received Dollar amount of cars on hand 1. Preparation costs (cleaning, oil, and gasoline costs) for each car received 2. Salespersons' commission of 5% of the sales price for each car sold 3. Administrative a. costs for ordering cars

Number of cars sold

Dollar amount of cars ordered

Number of cars ordered

Number of cars on hand

Number of cars received

Dollar amount of cars sold

Dollar amount of cars received

Dollar amount of cars on hand

1. Preparation costs (cleaning, oil, and gasoline costs) for each car received

2. Salespersons' commission of 5% of the sales price for each car sold

3. Administrative costs for ordering cars

Answer 1

1. Preparation costs (cleaning, oil, and gasoline costs) for each car received - Number of cars received

2. Salespersons' commission of 5% of the sales price for each car sold - Dollar amount of cars sold

3. Administrative costs for ordering cars - Number of cars ordered

Step-by-step explanation:

Since we have to find out the activity basis, so we presented below:

1. Preparation costs (cleaning, oil, and gasoline costs) for each car received - Number of cars received

2. Salespersons' commission of 5% of the sales price for each car sold - Dollar amount of cars sold

3. Administrative costs for ordering cars - Number of cars ordered

In the first case, the preparation cost for each car received would be allocated according to the number of cash received

In the second case, the commission is based on the sales price of cars sold so we take dollar amount of cars sold

In the third case, the administrative cost is applied for ordering cars so allocation is based on numbers of cars ordered