Part A)
If the cost is to be allocated based on the customer orders , the allocation will be as under:
Total cost = $ 79,000 + 65,000 + 74,000 + 75,000 = $ 293,000
Total customer orders = 130 + 330 + 1,700 = 2,160
Cost allocation rate based on customer orders = Total cost / Total no. of customer orders
= $ 293,000 / 2,160 = $ 135.65 per customer order
Cost allocation to General Supermarket customers = $ 135.65 * 130 = $ 17,634
Part B)
If the cost is to be allocated based as per activity based costing system , the allocation will be as under:
Cost allocation rate for an activity = Total cost of activity / Cost driver
Cost allocation rate for Order processing cost = $ 79,000 / (130 + 330 + 1,700) = 36.57
Cost allocation rate for Line item processing cost = $ 65,000 / (1,950 + 4,290 + 18,700) = 2.61
Cost allocation rate for Store deliveries cost = $ 74,000 / ( 140 + 300 + 1,050) = 49.66
Cost allocation rate for Carton handling cost = $ 75,000 / ( 37,800 + 25,500 + 14,700) = 0.96
Cost allocation for an activity = Cost driver of a department for a activity * Cost allocation rate for an activity
There are 4 activities so there are 4 cost allocation rates, to calculate cost allocation for a department sum of cost allocations for all these 4 activities will be considered
Cost allocation to Ma & Pa customers = (36.57 * 1700) + (2.61 * 18,700) + (49.66 * 1,050) + (0.96 * 14,700)
= $ 177,195
This is a cost allocation problem for a merchandising firm. Since merchandising firms do not have...
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 problem are to 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: Read the problem and question carefully to determine the cost driver. Compute the "overhead" rate: budgeted support costs / budgeted driver. Allocate...
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 problem are to customer groups, not to an individual products or jobs. Nonetheless, the allocation process is th 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...
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 problem are to 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...
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....
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 problem are to customer groups, not to individual products or jobs. Nonetheless, the allocation process is the same. Just follow the three steps used in the lectures: Read the problem and question carefully to determine the cost driver. Compute the "overhead" rate: budgeted support costs / budgeted driver. Allocate to...
Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & 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 chief accountant examined the firm's support costs and activities and collected the following data...
Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & 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 chief accountant examined the firm's support costs and activities and collected the following data...
Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & 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 chief accountant examined the firm's support costs and activities and collected the following data...
Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & 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 chief accountant examined the firm's support costs and activities and collected the following data...
Pharmax Distributors specializes in the distribution of pharmaceutical products at the retail level. Pharmax's customer base is comprised of three main retail groups: general supermarket chains, large drugstore chains, and small, single-store "Ma & 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 chief accountant examined the firm's support costs and activities and collected the following data...