Question

2. Assume that Office Mart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 13. (Prior to completing this requirement, change all worksheet figures back to their original amounts.) B с D E F A 1 Chapter 7: Applying Excel 2 3 Data 4 Manufacturing overhead 5 Selling and administrative overhead 6 $500,000 $300.000 7 Assernbling Units 50% 10% 1,000 units Processing Orders 35% 45% 250 orders Supporting Customers 5% 25% 100 customers Other 10% 20% . a Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 11 12 13 OfficeMart orders: 14 Customers 15 Orders 16 Number of filing cabinets ordered in total 17 Selling price 18 Direct materials 19 Direct labor 20 1 customer 13 orders 80 units $595 $150 $50 (a) What is the customer margin under activity-based costing when the number of orders increases to 13? (Enter a loss as a negative amount.) Customer margin under activity-based posting (b) What is the product margin under the traditional costing system when the number of orders increases to 13? (Enter a loss as a negative amount.) Product margin under the traditional costing system

Answer 1

a). Activity-based costing

Cost allocation:

	Accounting units	Processing units	Supporting customers	Other	Total
Manufacturing	250000	175000	25000	50000	500000
S&A	30000	135000	75000	60000	300000
Total	280000	310000	100000	110000	800000

Activity rates

Assembling units = 280000 / 1,000 units = $280 per unit
Processing orders = 310000 / 250 orders = $1240 per order
Supporting customers = 100000 / 100 customers = $1000 per customer

Sales(80 x 595)	47600
Costs: Direct material(80 x 180)	14400
Direct Labor(80 x 50)	4000
Assembling units(80 x 280)	22400
Processing units(13 x 1240)	16120
Supporting documents(1 x 1000)	1000
Activity-based consumer margin	(10320)

b) Traditional based

Manufacturing Overhead per unit = 500000 / 1000 orders = 500 per unit

Sales(80 x 595)	47600
Costs: Direct material(80 x 180)	14400
Direct Labor(80 x 50)	4000
Manufacturing overheads(80 x 500)	40000
Activity based consumer margin	(10800)