36. Rach & Johnson is an advertising agency. The firm uses an activity-based cos

Question

36. Rach & Johnson is an advertising agency. The firm uses an activity-based costing system to allocate overhead costs to its services. Information about the firm's activity cost pool rates follows: Activity cost pool Clerical costs Legal filing fees Client meeting time Activity rate $26 per administrative assistant hour S 150 per new ad campaign $57per meeting hour Smythe Company was a client of Rach & Johnson. Recently, 8 administrative assistant hours, 2 new ad campaigns, and 6 meeting hours were incurred for the Smythe Company account. Using the activity-based costing system, how much overhead cost would be allocated to the Smythe Company account? A. $ 233 B. $ 508 C. S 850 D. $3,912

Explanation / Answer

The overhead cost that would be allocated to Smythe Company Account will be :

26*8 + 150*2 + 57*6 = $850

Thee overheads have been alocated as per the hours taken, ad campaigns.

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