This is the same information as the previous question. Martinez Cake Company sells birthday cakes and...

This is the same information as the previous question. Martinez Cake Company sells birthday cakes and fruit cakes in bulk through its Internet business. Estimated overhead costs for the coming year total $330,000. The accountant for Martinez identified the following information in preparation for an activity-based costing system.

Activity	Allocation Base	Overhead Cost
Purchasing	Number of purchase orders	$82,500
Processing	Number of units processed	$198,000
Sales	Number of sales orders	$49,500

The estimated activity level for each type of cake and in total is as follows:

	Birthday Cakes	Fruit Cakes	Total
Number of purchase orders	4,875	2,000	6,875
Number of units processed	20,000	4,750	24,750
Number of sales orders	3,950	1,000	4,950

What is the total overhead allocated to the purchasing activity associated with fruit cakes?

$58,500

$82,500

$24,000

$32,000

Solutions

Expert Solution

Activity rate=Respective cost/Respective activity

Activity rate for :

Purchasing=(82500/6875)=$12 per order

Hence total overhead allocated to purchasing=(12*2000)

=$24,000.

ekkarill92 answered 2 years ago

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