Question

Sebastian company manufactures and sells sportswear products. sebastian uses activity-based costing to determine the cost of the customer return processing and the shipping activity. the customer return processing activity has an activity rate of $60 per return, and the shipping activity has an activity rate of $20 per shipment. sebastian shipped 4,000 units of product 1 in 800 shipments (some shipments are more than one unit). there were 90 returns. determine the total activity costs for the return and shipping activities of product 1?.

a. $5,400
b. $21,400
c. $5,500
d. $71,200

Answer 1

The answer is B) $21,400

Step-by-step explanation:

We are required to determine the total activity costs for the return and shipping activities for product 1.

Shipping activity has a cost of $20 per shipment.

Sebastian made 800 shipments. The cost of this will be 800 x $20 = $16000

It is given that there were 90 returns. The cost per return is $60. The total costs of the returns are $5400.

The total costs are thus 16000 + 5400 = $21400

Therefore the answer is B) $21,400