Exhibit 3-2
Dublin Pie Company Sells Cherry Pies and Apple

question 16

Multiple Choice

Exhibit 3-2
Dublin Pie Company sells cherry pies and apple pies in bulk online.Estimated overhead costs for 2016 total $600,000.The accountant for Dublin identified the following information for its activity-based costing system.
$\begin{array}{llc}\text { Activity } & \text { Allocation Base } & \text { Proportion of Total Overhead Cost } \\\hline \text { Purchasing } & \text { Number of purchase orders } & 25 \% \\\text { Processing } & \text { Number of units } & 60 \% \\\text { Sales } & \text { Number of sales orders } & 15 \%\end{array}$
The estimated activity level for each type of pie and in total is as follows:
$\begin{array}{lrrr}&\text { Cherry Pies } & \text { Apple Pies } & \text { Total }\\\text { Number of purchase orders } & 10,000 & 15,000 & 25,000 \\\text { Number of units } & 30,000 & 70,000 & 100,000 \\\text { Number of sales orders } & 1,000 & 4,000 & 5,000\end{array}$

-Refer to Exhibit 3-2.What is the overhead rate for the processing activity?

• A)$8.00
• B)$3.60
• C)$18.00
• D)$6.00
• E)None of the answer choices is correct.

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Definitions:

Competitive Advantage

The attribute that allows an organization to outperform its competitors, often through unique resources, capabilities, or positioning.

Transactional Activity

Transactional Activity refers to the routine, day-to-day operations and transactions within an organization, such as payroll processing and record-keeping.

Human Capital

The value of an individual’s competencies and capabilities, which is considered an asset to an organization’s performance and efficiency.

Human Resources Management

The strategic approach to the effective and efficient management of people in an organization to help their business gain a competitive advantage.