Dideda 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) $0.
B) $60,000.
C) $84,000.
D) $120,000.

Question

Dideda 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) $0. 
B) $60,000. 
C) $84,000. 
D) $120,000.

Quizplus · Accepted Answer

The total cost that should not be allocated to orders and products in the second stage of the allocation process is equal to the cost of the Other activity cost pool, which is $84,000. This cost pool consists of idle capacity and organization-sustaining costs, which do not directly relate to the production of products or the completion of orders. Therefore, they should not be allocated to specific products or orders in the second stage of the allocation process. Option A is incorrect because there is a cost that should not be allocated. Option B is incorrect because the cost of the Other activity cost pool is higher than $60,000. Option D is incorrect because the cost of the Other activity cost pool is lower than $120,000.

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