3 Data 4 \$ Manufacturing overhead Selling and administrative overhead 500,000 300,000 5 \$ 6 7 Assembling Units Other Processing Orders 35% Supporting Customers 5% 50% 10% 40% 20% 8 Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 11 10% 1,000 30% 250 100 units orders customers 12 13 OfficeMart orders: 14 Customers 1 customer 23 orders 80 units 15 Orders 16 Number of filing cabinets ordered in total 17 Selling price 18 Direct materials \$ 595 \$ 180 19 Direct labor \$ 50
3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 30% from 45% and the percentage attributable to supporting customers should be changed to 40% from 25%.
(a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.) Customer margin under activity-based costing (b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.) Product margin under the traditional costing system

a). Activity-based costing

Cost allocation:

 Accounting units Processing units Supporting customers Other Total Manufacturing 250000 175000 25000 50000 500000 S&A 30000 90000 120000 60000 300000 Total 280000 265000 145000 110000 800000

Activity rates

Assembling units = 280000 / 1,000 units = \$280 per unit
Processing orders = 265000 / 250 orders = \$1060 per order
Supporting customers = 145000 / 100 customers = \$1450 per customer

 Sales(80 x 595) 47600 Costs: Direct material(80 x 180) 14400 Direct Labor(80 x 50) 4000 Assembling units(80 x 280) 22400 Processing units(23 x 1060 per) 24380 Supporting documents(1 x 1450) 1450 Activity-based consumer margin (19030)

Manufacturing Overhead per unit = 500000 / 1000 orders = 500 per unit

 Sales(80 x 595) 47600 Costs: Direct material(80 x 180) 14400 Direct Labor(80 x 50) 4000 Manufacturing overheads(80 x 500) 40000 Activity-based consumer margin (10800)

c) All Statements are true

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