Question: The Pharmacy chains controller wants to use Activity-based (ABC) accounting to allocate the overhead costs. The following information is available: Activity Estimated Cost Cost Driver
The Pharmacy chains controller wants to use Activity-based (ABC) accounting to allocate the overhead costs. The following information is available:
| Activity | Estimated Cost | Cost Driver |
| Pharmacy rent and utilities | $80,000 | Technician hours |
| Pharmacy packaging costs | $30,000 | Number of prescriptions |
| Pharmacy training costs | $115,000 | Pharmacists hours |
| Total pharmacy overhead | $225,000 |
|
The pharmacy expects to incur 80,000 technician hours, 20,000 prescriptions and 23,000 pharmacists hours.
- Calculate the overhead allocation rate for each activity.
The pharmacist was given the following information regarding two recent pharmacy orders.
| Customer order # | Technician hours | # of prescriptions | Pharmacists hours |
| 1102 | 1.0 | 2 | 2.0 |
| 1103 | 0.5 | 1 | 4.0 |
- How much pharmacy overhead costs would be allocated to customer order number 1102 using Activity-based costing?
- How much pharmacy overhead costs would be allocated to customer order number 1103 using Activity-based costing?
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