Question

Fogle Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:Overhead costs: Wages and salaries $143,000Other expenses 60,000Total $203,000Distribution of resource consumption: Making Bouquets (Activity Cost Pools) Delivery (Activity Cost Pools) Other (Activity Cost Pools) TotalWages and salaries 55% 35% 10% 100%Other expenses 40% 30% 30% 100%The "Other" activity cost pool consists of the costs of Idle capacity and organization-sustaining costs.The amount of activity for the year is as follows:Activity Cost Pool ActivityMaking bouquets 58,325 bouquetsDelivery 8,500 bouquetsWhat would be the total overhead cost per bouquet according to the activity-based costing system? In other words, what would be the overall activity rate for the making bouquets activity cost pool?a. $1.81 per bouquets.b. $1.76 per bouquets.c. $1.74 per bouquets.d. $1.66 per bouquets.

Answer 1

b. $1.76 per bouquet.

Step-by-step explanation:

Wages and Salaries cost is 143,000

Other expenses is 60,000

Making bouquet activity allocations :

Wages and Salaries 143,000 * 55% = 78650

Other expenses 60,000 * 40% = 24,000

Total is 102,650

number of bouquets is 58,325

102,650 / 58,325 = 1.76 per bouquets.

The cost of making each bouquet is approximately $1.76 per bouquet.