Unique Finds sells fine collectible statues and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools.The first cost pool contains costs that are related to packaging and shipping.Unique has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: $$\begin{array} { | l | c | c | c | }
\hline { \text { Cost Pool } } & \begin{array} { c }
\text { Estimated } \
\text { Total } \
\text { Costs }
\end{array} & \text { Cost Driver } & \begin{array} { c }
\text { Estimated } \
\text { Annual } \
\text { Activity }
\end{array} \
\hline \begin{array} { l }
\text { Packaging and } \
\text { shipping }
\end{array} & \$ 67,200 & \text { Number of boxes shipped } & 16,000 \text { boxes } \
\hline \text { Final inspection } & 200,000 & \begin{array} { c }
\text { Number of individual items } \
\text { inspected }
\end{array} & 100,000 \text { items } \
\hline \text { General operations } & 85,000 & \text { Number of orders } & 10,000 \text { orders } \
\hline
\end{array}$$ A new customer orders two items that can be shipped in a single box.What is the total shipping department cost that will be allocated to this order?
A)$16.70
B)$14.70
C)$8.20
D)None of these answer choices are correct.

Question

Unique Finds sells fine collectible statues and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools.The first cost pool contains costs that are related to packaging and shipping.Unique has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: $$\begin{array} { | l | c | c | c | } 
\hline { \text { Cost Pool } } & \begin{array} { c } 
\text { Estimated } \
\text { Total } \
\text { Costs }
\end{array} & \text { Cost Driver } & \begin{array} { c } 
\text { Estimated } \
\text { Annual } \
\text { Activity }
\end{array} \
\hline \begin{array} { l } 
\text { Packaging and } \
\text { shipping }
\end{array} & \$ 67,200 & \text { Number of boxes shipped } & 16,000 \text { boxes } \
\hline \text { Final inspection } & 200,000 & \begin{array} { c } 
\text { Number of individual items } \
\text { inspected }
\end{array} & 100,000 \text { items } \
\hline \text { General operations } & 85,000 & \text { Number of orders } & 10,000 \text { orders } \
\hline
\end{array}$$ A new customer orders two items that can be shipped in a single box.What is the total shipping department cost that will be allocated to this order?
A)$16.70
B)$14.70
C)$8.20
D)None of these answer choices are correct.

Quizplus · Accepted Answer

The total shipping department cost that will be allocated to this order is the sum of the costs allocated from each of the three cost pools. The cost allocated from the packaging and shipping cost pool is $67,200 / 16,000 boxes * 1 box = $4.20. The cost allocated from the final inspection cost pool is $200,000 / 100,000 items * 2 items = $4.00. The cost allocated from the general operations cost pool is $85,000 / 10,000 orders * 1 order = $8.50. The total shipping department cost that will be allocated to this order is $4.20 + $4.00 + $8.50 = $16.70.

Unique Finds Sells Fine Collectible Statues and Has Implemented Activity-Based