Library Resources Company uses activity-based costing. The company produces soft
ID: 2376692 • Letter: L
Question
Library Resources Company uses activity-based costing. The company produces soft and hard-cover books. The estimated costs and expected activity for each of the activity pools follow:
Activity
Estimated
Expected Activity
Cost Pool
Cost
Hard-Cover
Soft-Cover
Total
Activity 1
$15,675
800
300
1,100
Activity 2
$11,900
500
200
700
Activity 3
$36,000
800
400
1,200
To which of the following is the rate for activity 3 that will used to apply costs to Soft-cover books closest? (PLEASE SHOW WORK...THANKS!)
Activity
Estimated
Expected Activity
Cost Pool
Cost
Hard-Cover
Soft-Cover
Total
Activity 1
$15,675
800
300
1,100
Activity 2
$11,900
500
200
700
Activity 3
$36,000
800
400
1,200
Explanation / Answer
Activty 3 rate = Cost/Total = 36000/1200 = $30 per cover
So Soft cover Allocation = 400*30 = $12000
Activity Rate for Soft cover is $30 per cover
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