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 $220,000 typically perform both tasks; other firm-wide overhead is expected to total $80,000. These costs are allocated as follows:

Riverside anticipates making 20,000 bouquets and 5,000 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:

$11.30.

some other amount.

$16.25.

$15.00.

$9.70.

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

$13.60.

$20.72.

some other amount.

$14.28.

$34.60.

   Bouquet
Production Delivery Other   Wages and salaries 70% 20% 10%   Other overhead 50% 30% 20%

Explanation / Answer

Bouquet - Total cost allocation = 220,000 * 0.70 + 80,000 * 0.50 = 154000 + 40000 = 194000

Anticipated production = 20000 Units

Cost per bouquet = 194000 / 20000 = 9.70...........Option - e

Question - 2

Delivery - Total cost allocation = 220000 * 20% + 80000 * 0.3 = 44000 + 24000 = 68000

Anticipated production = 5000 units

Cost per delivery = 68000 / 5000 = 13.6.................Option - A

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