Question

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, a Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cos 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: $ 960,000 390,000 270,000 Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and expenses Office expenses Administrative expenses Total cost 300,000 160,000 460,000 $ 2,540,000 The distribution of resource consumption across the activity cost pools is as follows: Other Travel 50% 70% 60% Pickup and Delivery 35% 5% 15% Customer Service 10% 0% 0% 25% 25% Totals 100% 100% 100% Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and expenses Office expenses Administrative expenses 0% 20% 90% 30% 60% 10% 50% 35% 100% 100% 100% 5% Required: Complete the first stage allocations of costs to activity cost pools. Pickup and Delivery Customer Service Travel Other Totals Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and expenses Office expenses Administrative expenses Total cost

Answer 1

Answer-1)-

Securi Corp
Activity costs pool
Activity	Travel	Pickup & delivery	Customer Service	Others	Total
	$	$	$	$	$
Driver & guard wages	960000*50%=480000	960000*35%=336000	960000*10%=96000	960000*5%=48000	960000
Vehicle operating expenses	390000*70%= 273000	390000*5%=19500	0	390000*25%=97500	390000
Vehicle depreciation	270000*60%=162000	270000*15%=40500	0	270000*25%=67500	270000
Customer representative salaries & expenses	0	0	300000*90%=270000	300000*10%=30000	300000
Office expenses	0	160000*20%=32000	160000*30%=48000	160000*50%=80000	160000
Administrative expenses	0	460000*5%=23000	460000*60%=276000	460000*35%=161000	460000
Total costs	915000	451000	690000	484000	2540000

2)-

Computation of activity rate for each of the activity cost pools

Activity Cost Pool	Estimated overhead cost $	Expected Activity	Calculation	Activity Rate
Caring for lawn	78600	square feet of lawn	$78600/180000	$.44 per square foot of lawn
Caring for garden beds-low maintenance	31200	square feet of low maintenance beds	$31200/26000	$1.2 per square foot of low maintenance beds
Caring for garden beds-        high maintenance	54800	square feet of high maintenance beds	$54800/20000	$2.74 per square foot of high maintenance beds
Travel to jobs	3400	miles	$3400/17000	$0.20 per mile
Customer billing                  and service                     7100                  customers             $7100/22              $322.73 per customer

Where

Activity Rate =   Estimated Overhead Cost $ / Expected Activity

3)-

Klumper Corporation
Overhead cost (Activity Based Costing)
Particulars	K425	M67
	$	$
Supporting direct labor	950 Labor hours*$10 per hour=9500	60 Labor hours*$10 per hour=600
Machine processing	2800 machine hour*$3 per hour=8400	50 machine hour*$3 per hour=150
Machine Setup cost	15 setups*$45 per setup=675	3 setups*$45 per setup=135
Production orders	15 order*$160 per order=2400	3 order*$160 per order=480
Shipments	30 shipments*$115 per shipment=3450	3 shipments*$115 per shipment=345
Product sustaining	3 product*$775 per product=2325	3 product*$775 per product=2325
Total overhead cost	26750	4035