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:

Driver and guard wages	$	1,120,000
Vehicle operating expense		550,000
Vehicle depreciation		430,000
Customer representative salaries and expenses		460,000
Office expenses		320,000
Administrative expenses		620,000
Total cost	$	3,500,000

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

	Travel		Pickup and Delivery		Customer Service		Other		Totals
Driver and guard wages	50	%	35	%	10	%	5	%	100	%
Vehicle operating expense	70	%	5	%	0	%	25	%	100	%
Vehicle depreciation	60	%	15	%	0	%	25	%	100	%
Customer representative salaries and expenses	0	%	0	%	90	%	10	%	100	%
Office expenses	0	%	20	%	30	%	50	%	100	%
Administrative expenses	0	%	5	%	60	%	35	%	100	%

Required:

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

	Pickup and Customer Travel Delivery Service Other Totals Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and expenses Office expenses Administrative expenses Total cost

Answer 1

Solution

Cost Allocation
	Travel	Pickup and Delivery	Customer Service	Other	Total
Driver and guard wages	$     560,000.00	$      392,000.00	$       112,000.00	$        56,000.00	$ 1,120,000.00
Vehicle Operating Expenses	$     385,000.00	$        27,500.00	$                         -	$      137,500.00	$      550,000.00
Vehicle Depreciation	$     258,000.00	$        64,500.00	$                         -	$      107,500.00	$      430,000.00
Customer Representative salaries and expenses	$                       -	$                        -	$       414,000.00	$        46,000.00	$      460,000.00
Office Expenses	$                       -	$        64,000.00	$          96,000.00	$      160,000.00	$      320,000.00
Administrative Expenses	$                       -	$        31,000.00	$       372,000.00	$      217,000.00	$      620,000.00
Total Cost	$ 1,203,000.00	$      579,000.00	$       994,000.00	$      724,000.00	$ 3,500,000.00