Question

Goldberg Co. uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

Overhead costs:

Wages & Salaries	$806,000
Factory Supplies	488,000
Total	$1,294,000

Distribution of resource consumption:

Activity Cost Pools	Clean-Up	Inspection	Other	Total
Wages and salaries	22%	60%	18%	100%
Factory Supplies	48%	20%	32%	100%

The amount of activity for the year is as follows:

Activity Cost Pool

Activity

Clean-Up	1,000	Batches
Inspection	400	Inspections

1. How much OVERHEAD cost would be allocated to a “Customer A,” who initiated125 batches and 55 inspections in a year?

b.         Using the following information, set up a Customer Margin Report using Activity Based Costing to determine the profitability of the customer.

                                                                        Customer A                            

            Sales                                                   $580,000                               

            Direct Material Cost                            $230,000                               

            Direct Labor Cost                                $150,000                               

            Selling Cost                                         $80,000                                 

           

Answer 1

And: Distribution of resource consumption : clean up Activity Inspection other Total wages & Salaries 177320 483600 145080 806000 (806000x 22-1.) (buc x604) (8060001124) Factory Supplies 234,240 97,600 156,160 48800 (488000 X 48+) (428000X.2017) (4880002.32) Total 411560 581200 301,240 1294,000 calculation of cost driver rate. Activity Total cost Total activity Cost driver rate clean up 411,560 1000 411056 ( $411560 1000 1453 Inspection 581,200 400 (581200 a) Overhead that should be allocated to "customer A" clean up Inspection 125 batches x $411056 55 inspection x $1453 = $51445 79915 $131360

$ 580,000 b) Margin report. Sales (-) Direct Material w Direct labor cost - Overhead (From a) It selling cost (230,000) (150,000) ( 131360) (80,000) :. Margin ($ 11360)

Answer to the above question is shown.