Dierich Company Uses an Activity-Based Costing System with Three Activity

question 43

Multiple Choice

Dierich Company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: $\begin{array} { | l | r | } \hline \text { Costs: } & \\\hline \text { Manufacturing overhead } & \$ 600,000 \\\hline \text { Selling and administrative expenses } & \underline { 220,000 } \\\hline \text { Total } & \$ 820,000 \\\hline\end{array}$

$\text { Distribution of Resource Consumption: }$
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Activity Cost Pools }$$\begin{array} { |l | r | r | r | r | } \hline & \text { Order Size } & \begin{array} { r } \text { Customer } \\\text { Support }\end{array} & \text { Other } & \text { Total } \\\hline \begin{array} { l } \text { Manufacturing } \\\text { overhead }\end{array} & 15 \% & 75 \% & 10 \% & 100 \% \\\hline \begin{array} { l } \text { Selling and } \\\text { administrative } \\\text { expenses }\end{array} & 60 \% & 20 \% & 20 \% & 100 \% \\\hline\end{array}$ The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools.
-How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

• A) $123,000.
• B) $222,000.
• C) $307,500.
• D) $492,000.

---

Definitions:

Psychic Income

The non-material satisfaction or pleasure derived from an activity or possession, not measured in terms of money.

Psychic Cost

The mental or emotional strain and stress that can arise from making decisions or engaging in a transaction, not accounted for in traditional financial costs.

Per Capita GDP

A measure of the total output of a country divided by the number of people in the country, providing an average economic output per person.

Wear Out Allowance

A depreciation method that factors in the reduction of an asset's value due to physical wear and tear over time.