Foster Florist Specializes in Large Floral Bouquets for Hotels and Other

question 27

Multiple Choice

Foster Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:

$\begin{array}{|l|r|}\hline \text { Overhead costs: } & \\\hline \text { Wages and salaries } & \$ 70,000 \\\hline \text { Other expenses } & \underline{50,000} \\\hline \text { Total } & \$ 120,000\\\hline \end{array}$

$\text { Distribution of Resource Consumption: }$

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Activity Cost Pools }$
$\begin{array}{|l|r|r|r|} \hline& \text { Making Bouquets } & \text { Delivery } & \text { Other } \\\hline \text { Wages and salaries } & 70 \% & 20 \% & 10 \% \\\hline \text { Other expenses } & 45 \% & 25 \% & 30 \% \\\hline\end{array}$
The "Other" activity cost pool consists of the costs of idle capacity and organizationsustaining costs. The amount of activity for the year is as follows:


$\begin{array}{|l|r|}\hline \text { Activity Cost Pool } & \text { Activity } \\\hline \text { Making bouquets } & 40,000 \text { bouquets } \\\hline \text { Delivery } & 1,000 \text { delive }\\\hline\end{array}$
-What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

• A) $24.00.
• B) $26.50.
• C) $27.00.
• D) $30.00.

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activity, such as rent and salaries.

Absorption Costing

A financial accounting technique that integrates all costs incurred from manufacturing, including direct materials, direct labor, along with both fixed and variable overhead costs, into the total cost of a product.

Direct Materials

Raw materials that can be directly linked to the production of finished goods in manufacturing.

Fixed Overhead

Fixed Overhead refers to the consistent, non-variable expenses incurred by a business, regardless of its level of production or sales activities.