Aunt Lucy’s Candies
Aunt Lucy’s Candies sells standard and premium chocolate confectionary through its catalogue business. Many of the confectionary are sold in bulk to other companies. Last year, the company incurred $300 000 in overhead costs. After implementing activity-based costing (ABC), the company’s controller identified the following information:

\begin{array} { l l c } \text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead Cost } \\\hline \text { Purchasing } & \text { Number of purchase orders } & 30 \% \\\text { Processing } & \text { Number of units } & 50 \% \\\text { Sales } & \text { Number of sales orders } & 20 \%\end{array}

The number of activities for standard and premium confectionary is as follows:

\begin{array}{lrr}&\underline{\text { Standard} } &\underline{ \text { Premium }} \\\text {Number of purchase orders}&4000& 2000 \\\text { Number of units }&200000 & 100000 \\\text {Number of sales orders}&3000 & 1000\end{array}

-What is the overhead rate for the purchasing activity?
A) $15.00
B) $ .07
C) $50.00
D) $ 1.07

When Comparing Traditional Product Costing and Activity-Based Costing (ABC),which Kind(s)of

Essay

Correct Answer:VerifiedBoth traditional and ABC allocate the co...View AnswerUnlock this answer nowGet Access to more Verified Answers free of chargeView Full Answer For Free

Correct Answer:
Verified
Both traditional and ABC allocate the co...
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge