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

question 94

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 Customer Support activity cost pool?

• A) $164,000.
• B) $389,500.
• C) $494,000.
• D) $615,000.

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Definitions:

Total Utility

The complete fulfillment gained from the consumption of a specific quantity of products or services.

Total Utility

The overall satisfaction or happiness a consumer gets from consuming a particular quantity of goods or services.

Risk-neutral

A risk preference suggesting indifference between taking a risk with a potential gain or loss and a certain outcome with the same expected payout.

Utility

A measure of satisfaction, happiness, or benefit derived from consuming a product or service.