Handal Corporation Uses Activity-Based Costing to Compute Product Margins

question 74

Multiple Choice

Handal Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

• A) $16.00 per order
• B) $1.00 per order
• C) $3.20 per order
• D) $1.18 per order

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Definitions:

Air Spring

A type of suspension system that uses air pressure in a flexible bellows to provide cushioning and support for vehicles.

Heavy-duty Trucks

Trucks designed for carrying large amounts of cargo or performing tasks requiring significant power, often used in construction and transportation industries.

Truck Suspension

The system of tires, tire air, springs, shock absorbers, and linkages that connects a vehicle to its wheels and allows relative motion between the two.

Overloaded

The condition where a vehicle or component carries more weight or is subjected to more stress than its intended capacity, risking damage or failure.