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:
$\begin{array} { | l | r | }
\hline \text { Costs: } & \
\hline \text { Manufacturing overhead } & \$ 360,000 \
\hline \text { Selling and administrative expenses } & \underline { 240,000 } \
\hline \text { Total } & \$ 600,000 \
\hline
\end{array}$

$\text { Distribution of Resource Consumption: }$
$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Activity Cost Pools }$$\begin{array} { |l | r | r | r | r | }
\hline & \text { Order Size } & \begin{array} { r }
\text { Customer } \
\text { Support }
\end{array} & \text { Other } & \text { Total } \
\hline \begin{array} { l }
\text { Manufacturing } \
\text { overhead }
\end{array} & 25 \% & 65 \% & 10 \% & 100 \% \
\hline \begin{array} { l }
\text { Selling and } \
\text { administrative } \
\text { expenses }
\end{array} & 60 \% & 20 \% & 20 \% & 100 \% \
\hline
\end{array}$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 customer support 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:
$\begin{array} { | l | r | } 
\hline \text { Costs: } & \
\hline \text { Manufacturing overhead } & \$ 360,000 \
\hline \text { Selling and administrative expenses } & \underline { 240,000 } \
\hline \text { Total } & \$ 600,000 \
\hline
\end{array}$

$\text { Distribution of Resource Consumption: }$
 $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Activity Cost Pools }$$\begin{array} { |l | r | r | r | r | } 
\hline & \text { Order Size } & \begin{array} { r } 
\text { Customer } \
\text { Support }
\end{array} & \text { Other } & \text { Total } \
\hline \begin{array} { l } 
\text { Manufacturing } \
\text { overhead }
\end{array} & 25 \% & 65 \% & 10 \% & 100 \% \
\hline \begin{array} { l } 
\text { Selling and } \
\text { administrative } \
\text { expenses }
\end{array} & 60 \% & 20 \% & 20 \% & 100 \% \
\hline
\end{array}$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 customer support 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

In the second stage of the activity-based costing (ABC) system, costs are allocated to cost objects based on the activities they require. Orders and customer support are activities, not cost objects like products or services. Therefore, the costs directly associated with these activities should be allocated to them in the first stage. In the second stage, these costs are then allocated from the activities to the final cost objects based on their usage of each activity. Thus, the question seems to imply that there are costs initially associated with orders and customer support that should not be allocated to them in the second stage, which suggests a misunderstanding of the ABC process. However, based on the options provided and the typical understanding of ABC, the correct answer would be the one that represents costs not meant to be allocated to these activities in the second stage, which is not standard practice in ABC. The correct answer, therefore, depends on specific information provided in the question's context, which is not available here. However, assuming the question implies there are specific costs not to be allocated to these activities in the second stage, the answer provided is based on the options given without additional context.

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