Fordham Florist specializes in large floral bouquets for hotels and other commer

Question

Fordham Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning it annual overhead costs and its activity based costing system:

Overhead costs:
Wages and salaries...$70,000
Other expenses... 40,000
Total $110,000

Distribution of resource consumption:
Activity Cost Pools
Making Bouquets Delivery Other Total

Wages and salaries 70% 20% 10% 100%
Other expenses 45% 25% 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 Activity
Making bouquets 40,000 bouquets
delivery 4,000 deliveries

What 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? (round to the nearest whole cent.)

a. $1.58
b. $1.24
c. $1.93
d. $1.68

Explanation / Answer

Making Bouquets Cost
Wages (70% of 70,000)......................$49,000
Other Expenses (45% of 40,000)............$18,000
Total...........................................$67,000

Total Bouquets = 40,000
Total costs = 67,000
Cost per Bouquet = 67,000 / 40,000
Cost per Bouquet = 1.675 = 1.68

d. $1.68

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