Question

Advanced Products Corporation has supplied the following data from its activity-based costing system: Overhead Costs $ зее, еее Wages and salaries Other overhead costs 100, 000 $ 400,000 Total overhead costs Total Activity for the Activity Cost Pool Supporting direct labor Order processing Customer support Other Activity Measure Number of direct labor-hours Number of customer orders Number of customers This is an organization- sustaining activity Year 20,000 DLHS 400 orders 200 customers Not applicable Distribution of Resource Consumption Across Activities Supporting Direct Labor Order Processing 40% Customer Other 10% Total 100% Support 20% Wages and salaries Other overhead costs 30% 30% 10% 20% 40% 100% During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products during the year. Data concerning that order follow: Data Concerning the Shenzhen Enterprises Order 10 units 2 DLHS per unit $ 300 per unit $ 180 per unit $ 50 per unit Units ordered Direct labor-hours Selling price Direct materials Direct labor Required: 1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. Calculate the total overhead costs for the order from Shenzhen Enterprises including customer support costs. 4. Calculate the customer margin for Shenzhen Enterprises.

Answer 1

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1		Direct labor Support	Order processing	Customer Support	Other	Totals
	Wages and salaries	$       1,20,000	$           90,000	$       60,000	$       30,000	$       3,00,000
	Other overheads cost	$           30,000	$           10,000	$       20,000	$       40,000	$       1,00,000
	Total cost	$       1,50,000	$       1,00,000	$       80,000	$       70,000	$       4,00,000
2	Activity cost pool	Activity rate
	Supporting direct labor	$               7.50	per DLH
	Order processing	$                 250	per order
	Customer Support	$                 400	per customer
3	Activity cost pool	ABC cost
	Supporting direct labor	$                 150
	Order processing	$                 250
	Customer Support	$                 400
	Total	$                 800
4	Shenzhen Enterprises
	Customer Margin - ABC Analysis
	Sales (10 X $300)		$             3,000
	Costs:
	Direct materials (10 X $180)	$             1,800
	Direct labor (10 X $50)	$                 500
	Overhead cost	$                 800
	Total cost		$             3,100
	Customer margin		$               -100

11 2 3 4 Wages and salaries Other overheads cost Total cost Direct labor Support Order processing Customer Support Other Totals =300000*0.4 =300000*0.3 =300000*0.2 =300000*0.1 =SUM(C2:F2) =100000*0.3 =100000*0.1 =100000*0.2 =100000*0.4 ESUM(C3:F3) =SUM(C2:03) =SUM(D2:03) =SUM(E2:E3) =SUM(F2:F3) =SUM(G2:53) 5 6 2 Activity cost pool Activity rate 7 Supporting direct labor =C4/20000 per DLH 8 Order processing =D4/400 per order Customer Support =E4/200 per customer 10 11 3 Activity cost pool ABC cost 12 Supporting direct labor =C7*2*10 13 Order processing =C8 14 Customer Support =C9 15 Total =SUM(C12:C14) 16 17 4 Shenzhen Enterprises 18 Customer Margin - ABC Analysis 19 Sales (10 X $300) =10*300 Costs: Direct materials (10 X $180) =10*180 22 Direct labor (10 X $50) =10*50 23 Overhead cost =C15 24 Total cost =SUM(C21:023) 25 Customer margin =D19-D24 20 21 26