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

question 75

Multiple Choice

Dilloo 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: 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, should NOT be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision-making?

• A) $80,000
• B) $132,000
• C) $0
• D) $66,000

---

Definitions:

Insurance Industry

A sector of the economy composed of companies that provide risk management through the contract of insurance policies, offering protection against financial loss.

Moral Hazard

The situation in which one party engages in risky behavior or lacks incentive to safeguard the other's interests due to protection against the consequences.

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome.

Quality Communication

The effective and efficient conveyance of information, ensuring clarity, accuracy, and understanding between parties.