Kamber Designs produces floral bouquets for commercial businesses (i.e. hotels) and uses an activity-based costing system. The company estimated that it would design 15,000 bouquets, make 2,000 deliveries totaling 25,000 miles, and accept 300 online orders. Data concerning overhead costs and activity pools is as follows: $\begin{array}{lr}
\text { Bouquet designs } & \$ 60,000 \
\text { Deliveries } & 21,000 \
\text { Online ordering } &{6,000} \
\quad \text { Total } & \$ 87.000
\end{array}$ During June, the company made 1,500 bouquets using 1,100 designs, made 325 deliveries and accepted 45 online orders. Using activity-based costing, what is the approximate overhead cost per bouquet during June?

Question

Quizplus · Accepted Answer

The overhead cost per bouquet is calculated by dividing the total overhead costs by the number of bouquets produced. The total overhead costs for June are calculated using the activity rates: Bouquet designs ($60,000/15,000 = $4 per design), Deliveries ($21,000/2,000 = $10.50 per delivery), and Online ordering ($6,000/300 = $20 per order). For June, the overhead costs are: (1,100 designs x $4) + (325 deliveries x $10.50) + (45 orders x $20) = $4,400 + $3,412.50 + $900 = $8,712.50. Dividing this by 1,500 bouquets gives approximately $5.81 per bouquet.

Kamber Designs Produces Floral Bouquets for Commercial Businesses (I During June, the Company Made 1,500 Bouquets Using 1,100 Designs