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- October 4, 2017 at 4:54 am #409373
Hi, Sir
I have a question want to ask you. Below is the question:
F co operates an activity based costing system to attribute its overhead costs to costing object. Its year ends at 30 June 20X2, the company expected to place a total of 3250 purchase orders at a total costs of $97,500. This activity and related costs were budgeted to occur at a constant rate , which is divided into 13 four-week period.
During the control period 10, a total of 267 purchase orders were placed at a total costs of $10,146..
What was the under recovery of these costs for control period 10?I calculated the result was $2,136 which was based on the number of purchase orders to calculate the absorption rate. But the answer was $2,646 which is based on the number of weeks in the year. Please help me to answer! Thank you so much!
October 4, 2017 at 7:30 am #409399It is because the question says that the related costs were budgeted to occur at a contact rate divided into 13 periods (not that they are basing on the actual number of orders). So they will have budgeted on absorbing 97,500/13 = 7,500 per period.
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