Question

Larry Enterprises makes a variety of products that it sells to other businesses. The company’s activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: Activity Cost Pool Activity Measure Activity Rate Supporting assembly Direct labor-hours (DLHs) $ 2.55 per DLH Processing batches Number of batches $ 138.35 per batch Processing orders Number of orders $ 77.00 per order Serving customers Number of customers $ 1,913.00 per customer The cost of serving customers, $1,913.00 per customer, is the cost of serving a customer for one year. Prosonic Corporation buys only one of the company’s products. The details of last year’s purchases of this product are listed below: Number of units purchased 900 units Number of batches 4 batches Number of orders 1 order Direct labor-hour requirement 0.10 DLHs per unit Selling price $ 29.95 per unit Direct materials cost $ 6.40 per unit Direct labor cost $ 1.85 per unit According to the ABC system, the total cost of the activity "Processing batches" for this customer this past year was closest to: $630.40 $138.35 $77.00 $553.40

Answer 1

The total cost of the activity "Processing batches" = 138.35*4=						553.4
Option 4 is correct