Question

Port Accounting performs tax services for Cathy Kane. Direct labor cost is $1,200; 600 CPU minutes were used; and 1 legal hour was used. What is the total cost of the Kane

job using activity-based costing?
A) $2,880
B) $3,000
C) $4,080
D) $4,200

Answer 1

Activity-based costing assigns costs to different activities or cost drivers. The total cost of the Kanejob can be calculated using the direct labor cost, CPU minutes, and legal hours.

Step-by-step explanation:

In activity-based costing, the total cost of a job is calculated by assigning costs to different activities or cost drivers. In this case, the direct labor cost of $1,200 is the cost driver. The CPU minutes and legal hours are used to allocate the cost of direct labor to the job. If we assume a predetermined overhead rate of $2 per CPU minute and $60 per legal hour, then the total cost of the Kanejob would be:

Total cost = Direct labor cost + (CPU minutes × overhead rate) + (Legal hours × overhead rate)

Total cost = $1,200 + (600 × $2) + (1 × $60) = $1,200 + $1,200 + $60 = $2,460

Therefore, the correct answer is $2,460.