What amount of shipping department costs should be allocated to these sales?

Nov 27th, 2015
Anonymous
Category:
Accounting
Price: $5 USD

Question description

Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:

Cost PoolTotal CostsCost DriverAnnual Activity
Packaging and shipping$166,100Number of boxes shipped22,600 boxes
Final inspection$203,500Number of individual items shipped98,500 items
General operations and supervision$80,000Number of orders8,900 orders

During the period, the Far East sales office generated 684 orders for a total of 6,140  items. These orders were shipped in 1,435 boxes. What amount of shipping department costs should be allocated to these sales?


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