Question

E-Flix rents DVDs that are mailed out to customers upon demand. E-Flix has identified three activities involved in getting the videos to its customers. Information on those activities for the month of July follows:Cost Pools Cost Drivers Estimated Overhead Cost Expected Use of Cost DriversOrder taking costs Number of orders $20,592 187,200 ordersTechnology support Number of minutes 11,700 234,000 minutesPicking and shipping costs Number of DVDs 39,624 330,200 DVDsDuring July, the Tucker family placed 17 orders consisting of 21 DVDs. Tucker required 7 minutes of tech support. Customers pay $9.00 per month to rent unlimited DVDs.

Required:

1. Using ABC, how much overhead is applied to the Tucker family account for order taking costs?Please show your work.Pick one answer:

a. $2.52b. $1.87c. $6.45d. $4.74

Answer 1

b. $1.87

Step-by-step explanation:

Number of order taking costs = $20,592

Number of orders = 187,200

Cost of activity

= $20,592 ÷ 187,200

= $0.11

The Statement of overhead allocated is given below:-

Number of orders = 17

Cost per activity = $0.11

Cost

= 17 × $0.11

= $1.87

Therefore, the overhead is applied to the Tucker family account for order taking costs $1.87