Question

Sleepeze Company produces mattresses for 20 retail outlets, or the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Sleepeze's customer activity are as follows: Large Retailer Smaller Retallers Units purchased 108,000 72,000 Orders placed 36 3,600 Number of sales calls 18 882 Manufacturing costs $28,800,000 Order filling costs allocated $43,200,000 $1,636,200 $702,000 $1,090,800 $468,000 Salesforce costs allocated Currently located on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver. Required: Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar. Order filling rate per order Selling call rate per sales call

Answer 1

Total Rate per activity Computation of Order filling rate per order and Selling call rate per sales call : Activity Cost Driver Large Activity Small Retailers Cost Pool Retailers Order filling costs 27,27,000 Order placed 3,600 Sales force costs 11,70,000 No of sales calls 882 Total 38,97,000 54 4,482 36 3,636 900 4,536 750.00 1,300.00 Cost assignment :- Large Activity Caluclation Order filling costs Sales force costs Total Activity Cost Driver Cost Pool 27,27,000 Order placed 11,70,000 No of sales calls 38,97,000 Retailers 27,000 (36/3636) *2727000 23,400 (18/900)*1170000 50,400 Small Caluclation Retailers 27,00,000 (3600/3636)*2727000 11,46,600 (882/900)*1170000 38,46,600