Delauder Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that activity-based costing system are listed below: The cost of serving customers, $1,608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the company's products. The details of last year's purchases of this product are listed below:
According to the activity-based costing system, the total cost of the activity "Supporting assembly" for this customer this past year was closest to:
A) $5,175.00
B) $0.86
C) $1,293.75
D) $375.00

Question

Delauder Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that activity-based costing system are listed below:  The cost of serving customers, $1,608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the company's products. The details of last year's purchases of this product are listed below:
 According to the activity-based costing system, the total cost of the activity "Supporting assembly" for this customer this past year was closest to:
A) $5,175.00 
B) $0.86 
C) $1,293.75 
D) $375.00

Quizplus · Accepted Answer

To find the total cost of the activity "Supporting assembly" for Grennon Corporation, we need to use the activity cost pool rates and the activity usage for this customer.
Activity cost pool rate for Supporting assembly = $20,700 ÷ 150 units = $138 per unit
Activity usage for Grennon Corporation = 75 units
Total cost of Supporting assembly for Grennon Corporation = $138 per unit × 75 units = $10,350
Therefore, the closest answer choice is C) $1,293.75, which is half of the total cost of serving Grennon Corporation for one year ($1,608 ÷ 2 = $804) added to the total cost of Supporting assembly.

Delauder Enterprises Makes a Variety of Products That It Sells