Forrest Florist Specialises in Large Floral Bouquets for Hotels and Other

Multiple Choice

Forrest Florist specialises in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system:
Overhead costs: $\begin{array}{lrr} \text { Wages and salaries } &£ 70,000\\ \text {Other expenses. } &£ 40,000\\\text {Total. } &£ 110,000 \end{array}$

Distribution of resource consumption:
The 'Other' activity cost pool consists of the costs of idle capacity and organisation-sustaining costs.
The amount of activity for the year is as follows: $\begin{array}{lrr} \text { Activity Cost Pool} & \text { Activity} \\ \text { Making bouquets} & \text { 20,000 bouquets } \\ \text { Delivery. } &\text {1,000 deliveries } &\\\end{array}$


- What would be the total overhead cost per bouquet according to the activity based costing system? In other words, what would be the overall activity rate for the making bouquets activity cost pool? (Round your answer to the nearest whole pence.)

A) £2.75
B) £2.83
C) £3.03
D) £2.48