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 cost drivers: What is the allocation rate per packing order using activity-based costing?

A) £15,000
B) £60
C) £7,500
D) £200

Question

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 cost drivers: 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 find the allocation rate per packing order, we need to divide the total overhead costs by the total number of packing orders. From the table, we can see that Packing Orders is the only cost driver that is related to both products, so we need to use the total number of packing orders for both products, which is 1,400.

Total Overhead Costs = £84,000
Total Packing Orders = 1,400

Allocation Rate per Packing Order = Total Overhead Costs / Total Packing Orders

Allocation Rate per Packing Order = £84,000 / 1,400

Allocation Rate per Packing Order = £60

Therefore, the answer is B) £60.

Zipp Company Manufactures Two Products (X and Y)