Question

1. Read the problem and question carefully to determine the cost driver 2. Compute the overhead rate: budgeted support costs/budgeted driver Allocate to the customer group specified in the question overhead rate x driver for the specific customer group Remember that with activity based costing (Parte), there is more than one driver and more than onerate 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 Pharma Distributors species in the distribution of sharmaceutical products at the retail level. Pharma's customer comprised of the main real groups general supermarket cha the relative probity of each customer group thamax plans to use an action system that recognizes the relative demands that these groups place on the company's resources Parma Holowing data for a typical operating period r ge drugstore chain, and mal gestore "Hass pharmacies. To evaluate che courtant examined the firm's support costs and activities and collected the Support Activity Order processing Budgeted Cost $70,000 Total Cost Driver 1,020 customer orders store deliveries Carton handling 576,000 $75,000 1,450 deliveries 72,000 cartons spoed She also gathered the following data for a typical operating period customer orders General Supermarket 150 Drugstore Chains 370 Ma .400 Deliveries Cartons shipped 120 37,200 200 1,000 1.050 14,700 REQUIRED ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATION TO THE NEAREST DOLLAR Part Astries 5 points) IF Pharmax uses a single driver system to allocate its support cost with number of deliveries as the driver how much would be a Part 8( tres 5 points)

Answer 1

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Pharmax
Calculation of Total overhead	Amount $	Note
Order Processing	78,000.00
Line Item Processing	58,000.00
Stores deliveries	76,000.00
Carton handling	75,000.00
Total overhead	287,000.00	A
Calculation of Total number of deliveries	Number of deliveries
General supermarket	120.00
Drugstore chains	280.00
Ma & Pa	1,050.00
Total number of deliveries	1,450.00	B
Calculation of Predetermined OH Rate	Amount $	Note
Total number of deliveries	1,450.00	See B
Total Manufacturing overhead	287,000.00	See A
Predetermined OH Rate	197.9	C=A/B
Allocated OH to Ma & Pa	Amount $
Total Deliveries	1,050.00	D
Predetermined OH Rate	197.90	See C
Allocated OH	207,795.00	E=C*D
Calculation of ABC rates for overhead		L	M	N=L/M
Activity cost pool	Cost Driver	Cost	Activity	ABC rates
Order Processing	Customer Orders	78,000.00	1,920.00	40.60
Line Item Processing	Line Items	58,000.00	25,330.00	2.30
Stores deliveries	Deliveries	76,000.00	1,450.00	52.40
Carton handling	Cartons shipped	75,000.00	72,900.00	1.00
Total overhead		287,000.00
Allocation table for Drugstore		See N	O	P=N*O
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Order Processing	Customer Orders	40.60	370.00	15,022.00
Line Item Processing	Line Items	2.30	5,180.00	11,914.00
Stores deliveries	Deliveries	52.40	280.00	14,672.00
Carton handling	Cartons shipped	1.00	21,000.00	21,000.00
Total Cost assigned				62,607.00