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

question 120

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,should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

• A) $0.
• B) $82,000.
• C) $104,000.
• D) $164,000.

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Definitions:

Morale

The feelings of enthusiasm and loyalty that a person or group has about a task or job.

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A document issued by an employer to an employee to pay for services rendered, typically reflecting the amount earned minus taxes and other deductions.