Reck Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $11,700; Order Filling, $17,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:
A) $43.00 per order
B) $7.50 per order
C) $6.00 per order
D) $17.80 per order

Question

Reck Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $11,700; Order Filling, $17,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:  The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:
A) $43.00 per order 
B) $7.50 per order 
C) $6.00 per order 
D) $17.80 per order

Quizplus · Accepted Answer

The activity rate for the Order Filling activity cost pool under activity-based costing is calculated as:
Activity rate = Total cost of Order Filling activity cost pool / Total number of orders
Activity rate = $17,800 / 1,000 orders
Activity rate = $17.80 per order 
Therefore, the closest answer choice is D, $17.80 per order.

Reck Corporation Uses Activity-Based Costing to Assign Overhead Costs to Products