Furniture Company Uses an Activity-Based Costing System in Which There

question 22

Multiple Choice

Furniture Company uses an activity-based costing system in which there are three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system:
$\begin{array}{|l|r|}\hline \text { Costs: } & \\\hline \text { Manufacturing overhead } & \$ 600,000 \\\hline \text { Selling and administrative expenses } & \underline{300,000} \\\hline \text { Total } & \$ 900,000\\\hline\end{array}$

$\text { Distribution of Resource Consumption: }$

$\begin{array}{|l|r|r|r|r|}\hline & \text { Order Size } & \begin{array}{r}\text { Customer } \\\text { Support }\end{array} & \text { Other } & \text { Total } \\\hline \begin{array}{l}\text { Manufacturing } \\\text { overhead }\end{array} & 45 \% & 50 \% & 5 \% & 100 \% \\\hline \begin{array}{l}\text { Selling and } \\\text { administrative } \\\text { expenses }\end{array} & 40 \% & 45 \% & 15 \% & 100 \% \\\hline\end{array}$

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 the 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) $210,000.
• B) $240,000.
• C) $390,000
• D) $300,000.

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Definitions:

Constant-cost Industry

An industry where the costs of production do not change as the total output in the industry changes.

Long-run Supply

Long-run Supply refers to the quantity of a good that producers are willing and able to supply onto the market at different price levels when all production inputs can be varied.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of that good that producers are willing to supply.

Increasing-cost Industry

An industry in which the costs of production increase as the industry expands due to factors like limited resources or higher input prices.