Aunt Lucy%u2019s Candies Aunt Lucy%u2019s Candies sells standard and premium cho
ID: 2374575 • Letter: A
Question
Aunt Lucy%u2019s Candies
Aunt Lucy%u2019s Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company%u2019s controller identified the following information:
Activity
Allocation Base
Proportion of Overhead Cost
Purchasing
Number of purchase orders
30%
Processing
Number of units
50%
Sales
Number of sales orders
20%
The number of activities for standard and premium candies is as follows:
Standard
Premium
Number of purchase orders
6,000
4,000
Number of units
400,000
100,000
Number of sales orders
2,000
3,000
Refer to the Aunt Lucy%u2019s Candies information above. What is the overhead rate for the sales activity?
a. $102.63 per sales order
b. $16.00 per sales order
c. $52.23 per sales order
Aunt Lucy%u2019s Candies
Aunt Lucy%u2019s Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company%u2019s controller identified the following information:
Activity
Allocation Base
Proportion of Overhead Cost
Purchasing
Number of purchase orders
30%
Processing
Number of units
50%
Sales
Number of sales orders
20%
The number of activities for standard and premium candies is as follows:
Standard
Premium
Number of purchase orders
6,000
4,000
Number of units
400,000
100,000
Number of sales orders
2,000
3,000
Explanation / Answer
overhaed rate=16 per sales order
sales =(400000*20%)/(2000+3000)=16
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.