ACCA Applied Skills · Performance Management · Activity-based costing
Rowan Co's order processing cost pool is $48,000 and the cost driver is the number of customer orders, of which there were 1,200 in the period. Product Z was sold on 150 orders and 3,000 units of Z were sold. What is the order processing cost per unit of Z under ABC?
The order processing cost is $2.00 per unit of Z. The driver rate is $48,000 divided by 1,200 orders, or $40 per order. Z used 150 orders, giving $6,000, which spread over 3,000 units is $2.00 each.
- A$16.00
- B$40.00
- C$2.00Correct
- D$0.05
Explanation
Rate per order = $48,000 / 1,200 = $40. Z is assigned 150 x $40 = $6,000. Per unit this is $6,000 / 3,000 = $2.00. $16.00 divides the whole pool by Z's units, ignoring the driver.
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