Riverside Florists uses an activity-based costing system to compute the cost of

Question

Riverside Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $210,000 typically perform both tasks; other firm-wide overhead is expected to total $50,000. These costs are allocated as follows

Riverside anticipates making 29,000 bouquets and 3,000 deliveries in the upcoming year.

1. The cost of wages and salaries and other overhead that would be charged to each bouquet made is closest to:

2.The cost of wages and salaries and other overhead that would be charged to each delivery is closest to:

   Bouquet
Production Delivery Other   Wages and salaries 60% 30% 10%   Other overhead 50% 40% 10%

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Total Cost = 210000*60% (Wages and Salaries) + 50000*50% (Other Overhead) = 151000

Cost of Wages and Salaries and Other Overheads Charged to Each Bouquet = Total Cost/Total Bouquets = 151000/29000 = $ 5.21

Answer is $5.21

Part 2:

Total Cost = 210000*30% (Wages and Salaries) + 50000*40% (Other Overhead) = 83000

Cost of Wages and Salaries and Other Overheads Charged to Each Delivery = Total Cost/Total Delivery = 83000/3000 = $27.67

Answer is $27.67

Thanks.

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