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:
$\begin{array}{|l|c|c|c|}\hline\text { Cost Pool } & \begin{array}{c}
\text { Estimated } \
\text { Total Costs }
\end{array} & \text { Cost Driver } & \text { Estimated } \
&&&\text { Annual Activity }\
\hline \text { Packaging and shipping } & \$ 67,200 & \text { Number of boxes shipped } & 16,000 \text { boxes } \
\hline \text { Final inspection } & 200,000 & \text { Number of individual items inspected } & 100,000 \text { items } \
\hline \text { General operations } & 85,000 & \text { Number of orders } & 10,000 \text { orders } \
\hline
\end{array}$
During June, 4,000 items were sold reflecting 800 orders that were packed and shipped in 2,100 boxes. What amount is allocated to each order for general operations of the department?

Question

Quizplus · Accepted Answer

The cost allocated to each order for general operations is calculated by dividing the total estimated costs for general operations by the estimated annual activity (number of orders). Thus, $85,000 / 10,000 orders = $8.50 per order.

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