Pedroni Corporation Uses Activity-Based Costing to Compute Product Margins

question 118

Multiple Choice

Pedroni Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
-The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

• A)$10.00 per order
• B)$0.50 per order
• C)$0.67 per order
• D)$2.05 per order

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Definitions:

Competitive Price-searcher

A market condition where firms have some control over their pricing due to differentiated products, leading to a search for competitive prices.

Low Barriers

Conditions that make it easy for new firms to enter an industry, often leading to increased competition.

High Barriers

Referring to the substantial obstacles that prevent new competitors from easily entering an industry or market.

Economic Profit

The financial gain achieved when revenues exceed the total opportunity costs, including both explicit and implicit costs.