Question

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:

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The distribution of resource consumption across the activity cost pools is as follows: 

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Required :

Complete the first stage allocations of costs to activity cost pools.

Pickup and Delivery Customer Travel Service Other Totals Driver and guard wages Vehicle operating expense Vehicle depreciatio


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Answer #1

Here in activity costing concept we allocate our fixed cost overheads in the ratio of activity cost pool so that we can find actual cost per unit for each activity of business:

The solution for above solution is as under:-

Particulars

Travel

(amount in $)

Pickup and delivery

(amount in $)

Customer service

(amount in $)

Other

(amount in $)

Totals

(amount in $)

Driver and guard wages 420,000 294,000 84000 42,000 840,000
Vehicle operating expense 189,000 13,500 - 67,500 270,000
Vehicle deprecation 90,000 22,500 - 37,500 150,000
Customer representative salaries and expenses - - 162,000 18,000 180,000
Office expenses - 8,000 12,000 20,000 40,000
Administrative expenses - 17,000 204,000 119,000 340,000
Total cost 699,000 355,000 462,000 304,000 1,820,000
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