Dercole Corporation Uses Activity-Based Costing to Assign Overhead Costs to Products

question 138

Multiple Choice

Dercole Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $43,200; Order Filling, $13,900; and Other, $14,900. 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: The activity rate for the Machining activity cost pool under activity-based costing is closest to:

• A) $7.20 per MH
• B) $4.02 per MH
• C) $5.00 per MH
• D) $4.32 per MH

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Definitions:

Competitive-Parity Method

A budgeting technique in marketing where a company matches its advertising spending to that of its competitors to prevent loss of market share.

Percentage-of-Sales Method

A budgeting technique where advertising and promotions budget is set based on a fixed percentage of past or forecasted sales.

Task-Based Method

A methodology focused on completing specific tasks as a means of learning, organizing work, or achieving objectives, often used in educational contexts and project management.

Public Relations Campaign

A strategic communication process that builds mutually beneficial relationships between organizations and their publics.