Data concerning three of the activity cost pools of Salcido LLC, a legal firm, have been provided below: Activity Cost Pool Total Cost Total Activity Researching legal issues $ 20,930 670 research hours Meeting with clients $ 1,184,706 7,313 meeting hours Preparing documents $ 92,290 5,770 documents The activity rate for the "meeting with clients" activity cost pool is closest to:

Question

Business

Matilda Salas

30 October, 02:13

Data concerning three of the activity cost pools of Salcido LLC, a legal firm, have been provided below: Activity Cost Pool Total Cost Total Activity Researching legal issues $ 20,930 670 research hours Meeting with clients $ 1,184,706 7,313 meeting hours Preparing documents $ 92,290 5,770 documents The activity rate for the "meeting with clients" activity cost pool is closest to:

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Rocco Salas · Answer 1

= $162 per meeting hour

Explanation:

Under activity-based costing method, overheads are charged to units produced using cost drivers unlike the traditional absorption costing where overhead are charged using volume-related bases only like direct labor hours.

A cost driver is the most important factor that causes a change in the amount of activity overhead. For example, an appropriate cost driver for allocating Meetings with clients overheads would be meeting hours.

Overheads Activity rate = Activity overhead / number of cost drivers

Activity rate for meeting with clients

= Activity overheads / total meeting hours

Meeting with clients overhead = $1,184,706

Total meeting hours = 7,313 hours

= $ $1,184,706 / 7,313 hours

= $162 per meeting hour