Question

This is a cost allocation problem for a merchandising firm. Since merchandising firms do not have overhead, you must allocate "support costs" instead of "overhead costs." Also, the allocations in this prob customer groups, not to an individual products or jobs. Nonetheless, the allocation process is the same. Just follow the three steps used in the lectures: 1. Read the problem and question carefully to determine the cost driver. 2. Compute the "overhead" rate: budgeted support costs / budgeted driver. 3. Allocate to the customer group specified in the question: overhead rate X driver for the specific customer group. Remember that with activity-based costing (Part B), there is more than one driver and more than one rate, and the allocation to a customer group is the sum of several individual allocations. Each part of the problem is worth five points, and you get five tries for each part. Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retall groups: general supemarket chains, large drugstore chains, and small & Pa" pharmacies. To evaluate the relative profitability of each customer group, Pharmax plans to use an allocation system that recognizes the relative demands that these groups place on the company's resources. Parmax's chie examined the firm's support costs and activities and collected the following data for a typical operating period: Support Activity Budgeted Cost Total Cost Driver Order processing $88,000 2,110 customer orders Line item processing $64,000 25,450 line items $72,000 Store deliveries 1,560 deliveries 77,350 cartons shipped Carton handling $75,000 She also gathered the following data for a typical operating period: General Supermarket Drugstore Chains Ma & Pa Customer orders 130 380 1,600 Line items 1,690 4,560 19,200 Deliveries 100 310 1,150 Cartons shipped 24,800 33,000 19,550 REQUIRED [ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) IF Pharmax uses a single-driver system to allocate its support costs, with number of deliveries as the single driver, how much would be allocated to its Ma & Pa customers? 18421.8 雷误,Tries 1/5 以前的尝试 提交备 Part B (5 tries; 5 points) If Pharmax uses an activity-based costing system to allocate its overhead costs, how much would be allocated to its Drugstore Chain customers? **E Trics 0/5

Answer 1

Pharmax Distributors Requirement Part A Support Activity Budgeted Cost Total Drivers Cost per Driver Order Processing 2110 customer orders 88000 41.71 per order per line item Line Item Processing 64000 25450 line items 2,51 Store Deliveries 72000 1560 deliveries per delivery 46.15 Carton Handling 77350 cartons shipped per carton shipped 75000 0.97 299000 Single Driver = Budgeted Cost / Number of delveries = 299000 / 1560 = 191.67 %3D Overhead allocated to Ma & Pa customers = 299000 x 1150 /1560 = 220416.7 Requirement Part B Activity based alloaction for Drugstore Chain customers Support Activity Cost per Driver Drivers Total Cost Order Processing customer orders 41.71 380 15848 Line Item Processing line items 11467 2.51 4560 Store Deliveries deliveries 14308 46.15 310 Carton Handling cartons shipped 0.97 24800 24047 65670