Cofab makes calculators from purchased parts. It is a manual operation consisting of three stations. Materials...
Cofab makes calculators from purchased parts. It is a manual operation consisting of three stations. Materials cost $1.25 per calculator. Several back office employees handle the orders and invoices and the company has a sales force that sells the product. The following are the cost pools and cost driver information for each activity.
|
Activity |
Driver |
Driver Frequency |
Cost |
|
Assembly |
Units made |
750,000 |
$562,500 |
|
Order processing |
Orders taken |
10,000 |
$200,000 |
|
Invoicing |
Invoices mailed |
25,000 |
$150,000 |
|
Accounting |
Checks received |
50,000 |
$250,000 |
|
Sales |
Orders taken |
10,000 |
$300,000 |
-
Calculate the activity rates for each of the activity cost pools
-
If one customer buys 5,000 units in one order, which takes 2 invoices to get payment and payment arrives in 3 checks that are processed by Accounting. What is the total cost of this customer’s order?
Homework Answers
Calculation of activity rates
Assembly = $562500/750000 = 0..75
Order processing = $200000/10000 = $20
Invoicing = $150000/25000 =$6
Accounting = $250000/50000 =$5
Sales = $300000/10000 = $30
Calculation of overhead cost of order
| Activity | rate | driver | amount |
| Assembly | $0.75 | 5000 | $3750 |
| Order processing | $20 | 1 | $20 |
| Invoicing | $6 | 2 | $12 |
| Accounting | $5 | 3 | $15 |
| Sales | $30 | 1 | $30 |
| Total | $3827 |
Material cost of order = 5000 units * $1.25
= $6250
Total cost of order = $6250 + $3827 = $10077
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