First Décor Has Analyzed the Indirect Costs Associated with Servicing

question 64

Multiple Choice

First Décor has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results for the year appear below:
$\begin{array}{lrlr}\hline \text { Cost Pool } & \text { Cost } & \text { Cost Driver } & \text { Quantity } \\\hline \text { Processing electronic orders } & \$ 400,000 & \text { Number of orders } & 40,000 \\\text { Processing non-electronic orders } & 120,000 & \text { Number of orders } & 8,000 \\\text { Picking orders } & 240,000 & \text { Number of different products ordered } & 120,000 \\\text { Packaging orders } & 180,000 & \text { Number of items ordered } & 150,000 \\\text { Returns } & 15,000 & \text { Number of returns } & 3,000\end{array}$
One customer of First Décor placed 30 electronic orders with a total selling price of $25,400. The direct cost of these orders is $17,200. The orders consist of five different products with a total of 2,200 items, and two returns. Using an activity-based costing method, how much are the indirect costs associated with serving this customer?

• A) $2,960
• B) $996
• C) $2,660
• D) $3,110

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Definitions:

Artificial

Something made or produced by human beings rather than occurring naturally, typically used to describe objects that mimic or replicate natural items.

Unconscious Desires

Refers to wants or needs that a person is not aware of but that influence behavior according to psychoanalytic theory.

Persistent Parental Gratification

A parenting approach where a child's needs and desires are consistently met by the parents, possibly leading to a sense of entitlement or dependency.

Overpermissiveness

Overpermissiveness is a parenting or educational style characterized by granting excessive freedom or failing to enforce necessary boundaries and discipline.