Question

TB Problem Qu. 7-187 (Algo) Figge and Mathews Public Limited Company, a consulting ... Figge and Mathews Public Limited Company, a consulting 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: Distribution of resource consumption: 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?

Answer 1

The question discusses the allocation of costs in an activity-based costing system and emphasizes the importance of understanding fixed, variable, and marginal costs for making profit-maximizing decisions.

Step-by-step explanation:

The question pertains to cost allocation for a company using activity-based costing, which involves distributing a firm's costs across various activity cost pools. When calculating cost allocations, the company must consider fixed costs, variable costs, marginal costs, and how these contribute to the determination of average total and average variable costs. These statistics provide insights into the firm’s cost structure, which is crucial for strategic planning and decision-making, especially when attempting to determine the profit-maximizing quantity of output.

Understanding how to break down and allocate total costs effectively is essential for any firm as it directly impacts profitability. Companies must combine these cost perspectives with sales and revenue analysis, which reflects the market structure, to arrive at the most financially beneficial decisions.