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3 Data 4 $ Manufacturing overhead Selling and administrative overhead 500,000 300,000 5 $ 6 7...

3 Data 4 $ Manufacturing overhead Selling and administrative overhead 500,000 300,000 5 $ 6 7 Assembling Units Other Processi3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processin(a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data ar(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead

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
(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost pool to the supporting customers cost pool. ? When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently. ? When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less frequently.
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ReportAnswer #1

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)

b) Traditional based

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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