Question

Advanced Products Corporation has supplied the following data from its activity-based costing system: Overhead Costs Wages and salaries Other overhead costs Total overhead costs $ 300,000 100,000 $ 400,000 Activity Cost Pool Supporting direct labor Order processing Customer support Other Activity Measure Number of direct labor-hours Number of customer orders Number of customers This is an organization- sustaining activity Total Activity for the Year 20,000 DLHS 400 orders 200 customers Not applicable Distribution of Resource Consumption Across Activities Supporting Order Direct Labor Processing Wages and salaries 40% 30% Other overhead costs 30% 10% Customer Support 20% 20% Other 10% 40% Total 100% 100% During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products during the year. Data concerning that order follow: Data Concerning the Shenzhen Enterprises Order Units ordered 10 units Direct labor-hours 2 DLHS per unit Selling price $ 300 per unit Direct materials $ 180 per unit Direct labor $ 50 per unit Required: 1. Prepare a report showing the first stage allocations of overhead costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Calculate the total overhead costs for the order from Shenzhen Enterprises including customer support costs. 4. Calculate the customer margin for Shenzhen Enterprises.

Answer 1

solution: Other Total cost Supporting Other Direct labor Processing customer support wages and salaries Other overhead 40% 30% 30% 10% 20% 20% 10% 40% 300000 100000 1 )first stage allocations of costs to activity cost pools. Other Total cost Supporting Other Direct labor Processing customer support L wages and salaries** Other overhead total 120000 30000 150000 90000 10000 100000 60000 20000 80000 30000 40000 70000 300000 100000 400000 **First stage allocation = Total cost * percent for example wages in supporting direct labor = 300000*40%=120000 2) activity rate activity cost pool cost b Supporting direct labor Other processing Customer support total activity activity rate a/b 150000 20000 7.50 per DLH 100000 400 250.00 per order 80000 2001 400.00 per customer | 3c) cost of job Activity Cost Pool (a) 20 Supporting direct labor Other processing Customer support Total overhead costs Activity Rate Activity 7.50 250.00 400.00 (a) (b) ABC Cost 150.00 250.00 400.00 800.00 3000.00 4) customer margin report sales=300*10 cost Direct material=10*180 Direct labor=10*50 Supporting direct labor Other processing Customer support total cost Margin earned on job 1800.00 500.00 150.00 250.00 400.00 3100.00 -100.00