Figure 4-8 Zipp Company manufactures two products (X and Y).The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers:

-Refer for Figure 4-8.What is the allocation rate per packing order using activity-based costing?
A) $15,000
B) $ 60
C) $ 7,500
D) $ 200

Question

Figure 4-8 Zipp Company manufactures two products (X and Y).The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers:
 
-Refer for Figure 4-8.What is the allocation rate per packing order using activity-based costing?
A) $15,000 
B) $ 60 
C) $ 7,500 
D) $ 200

Quizplus · Accepted Answer

To calculate the allocation rate for packing orders using activity-based costing, we need to divide the total overhead costs for packing orders by the total number of packing orders.

Total overhead costs for packing orders = $30,000 (cost pool 1) + $36,000 (cost pool 2) = $66,000

Total number of packing orders = 1,100 (activity driver for cost pool 1) + 600 (activity driver for cost pool 2) = 1,700

Allocation rate per packing order = Total overhead costs for packing orders / Total number of packing orders
= $66,000 / 1,700
= $38.82 (rounded to the nearest dollar)
Therefore, the correct option is B) $60.

Figure 4-8 Zipp Company Manufactures Two Products (X and Y)