Question

Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $260,000 typically perform both tasks; other firm-wide overhead is expected to total $60,000. These costs are allocated as follows:
Bouquet Production Delivery Other
Wages and salaries 60 % 30 % 10 %
Other overhead 50 % 40 % 10 %
Skyline anticipates making 20,500 bouquets and 4,000 deliveries in the upcoming year.
1. The cost of wages and salaries and other overhead that would be charged to each delivery is closest to __________?
2.The cost of wages and salaries and other overhead that would be charged to each delivery is closest to __________?

Answer 1

Answer:

1. $9.07

2. $25.5

Explanation:

(a) Total Cost:

= 260,000 × 60% (Wages and Salaries) + 60,000 × 50% (Other Overhead)

= $186,000

Cost of Wages and Salaries and Other Overheads Charged to Each Bouquet:

= Total Cost ÷ Total Bouquets

= $186,000 ÷ 20,500

= $9.07

(b) Total Cost:

= 260,000 × 30% (Wages and Salaries) + 60,000 × 40% (Other Overhead)

= $102,000

Cost of Wages and Salaries and Other Overheads Charged to Each Delivery:

= Total Cost ÷ Total Delivery

= $102,000 ÷ 4,000

= $25.5