QUESTION #1 Health-Tex produces an impressive line of safety masks. The company has established the following selling and distribution support activity-cost pools and corresponding activity drivers: Activity Marketing Customer service Order execution Warehousing Cost $30,000 10,000 5,000 5,000 Cost driver $500,000 of sales 5,000 customer 100 orders 50 product lines Required: 1. Determine the activity-cost-driver rate for each of the four selling and distribution activities. 2. If you were the accountant, how would you select the cost drivers for activity-based costing? 3. Explain how activity-based costing systems may provide more accurate product costs than traditional cost systems.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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QUESTION #1
Health-Tex produces an impressive line of safety masks. The company has established the
following selling and distribution support activity-cost pools and corresponding activity drivers:
Activity
Marketing
Customer service
Order execution
Warehousing
Cost
$30,000
10,000
5,000
5,000
Cost driver
$500,000 of sales
5,000 customer
100 orders
50 product lines
Required:
1. Determine the activity-cost-driver rate for each of the four selling and distribution activities.
2. If you were the accountant, how would you select the cost drivers for activity-based costing?
3. Explain how activity-based costing systems may provide more accurate product costs than
traditional cost systems.
Transcribed Image Text:QUESTION #1 Health-Tex produces an impressive line of safety masks. The company has established the following selling and distribution support activity-cost pools and corresponding activity drivers: Activity Marketing Customer service Order execution Warehousing Cost $30,000 10,000 5,000 5,000 Cost driver $500,000 of sales 5,000 customer 100 orders 50 product lines Required: 1. Determine the activity-cost-driver rate for each of the four selling and distribution activities. 2. If you were the accountant, how would you select the cost drivers for activity-based costing? 3. Explain how activity-based costing systems may provide more accurate product costs than traditional cost systems.
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