Tip Top Company sells umbrellas suited for small and large picnic tables. Based on the advice of its accountant, Tip Top is considering whether to adopt an activity-based costing system. To evaluate the possible impact on cost, the company has accumulated the following data from last year:

The numbers of activities for small and large umbrellas were as follows:

Required

A. Calculate the overhead rates for the following activities: purchasing, receiving, and sales.

B. Calculate the dollar amount of overhead that should be assigned to small and large umbrellas for each of the threeactivities.

Transcribed Image Text:

Activity Allocation Base Overhead Cost Purchasing Number of purchase orders $300,000 Receiving Number of shipments received 150,000 Sales Number of sales orders 150,000