Exercise - Comprehensive Activity-Based Costing Exercise
Advanced Products Corporation has supplied the following data from its activity-based costing system:
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Overhead Costs
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Wages and salaries
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$300,000
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Other overhead costs
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100,000
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Total overhead costs
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$400,000
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Activity Cost Pool
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Activity Measure
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Total Activity for the Year
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Supporting direct labor
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Number of direct labor-hours
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20,000 DLHs
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Order processing
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Number of customer orders
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400 orders
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Customer support
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Number of customers
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200 customers
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Other
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This is an organization-sustaining activity
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Not applicable
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Distribution of Resource Consumption Across Activates:
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Supporting Direct Labor
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Order Processing
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Customer Support
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Other
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Total
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Wages and salaries
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40%
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30%
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20%
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10%
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100%
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Other overhead costs
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30%
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10%
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20%
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40%
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100%
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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:
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Data Concerning the Shenzhen Enterprises Order
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Units ordered
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10 units
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Direct labor-hours
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2 DLHs per unit
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Selling price
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$300 per unit
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Direct materials
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$180 per unit
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Direct labor
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$50 per unit
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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.