In: Accounting
Ferris Corporation makes a single product—a fire-resistant commercial filing cabinet—that it sells to office
furniture distributors. The company has a simple ABC system that it uses for internal decision making. The
company has two overhead departments whose costs are listed on the following page:
Manufacturing overhead .................................. $500,000
Selling and administrative overhead ................ 300,000
Total overhead costs ........................................ $800,000
The company’s ABC system has the following activity cost pools and activity measures:
Activity Cost Pool Activity Measure
Assembling units ..................... Number of units
Processing orders .................... Number of orders
Supporting customers ............. Number of customers
Other ........................................ Not applicable
Costs assigned to the “Other” activity cost pool have no activity measure; they consist of the costs of
unused capacity and organization-sustaining costs—neither of which are assigned to orders, customers, or
the product.
Ferris Corporation distributes the costs of manufacturing overhead and of selling and administrative
overhead to the activity cost pools based on employee interviews, the results of which are reported below:
Distribution of Resource Consumption Across Activity Cost Pools |
|||||
Assembling units |
Processing Orders |
Supporting Customers |
Other |
Total |
|
Manufacturing overhead |
50% |
35% |
5% |
10% |
100% |
Selling and administrative |
10% |
45% |
25% |
20% |
100% |
Total activity |
1,000 units |
250 orders |
100 customers |
Required:
1- Perform the first-stage allocation of overhead costs to the activity cost pools and find manufacturing overhead for Assembling units.
2-Compute activity rates for the activity cost pools and find the activity rate for processing orders
3-Compute activity rates for the activity cost pools and find the activity rate for supporting customers
4-Office Mart is one of Ferris Corporation’s customers. Last year, Office Mart ordered filing cabinets four different times. Office Mart ordered a total of 80 filing cabinets during the year. What is the ABC cost for Assembeling unit?
5-Office Mart is one of Ferris Corporation’s customers. Last year, Office Mart ordered filing cabinets four different times. Office Mart ordered a total of 80 filing cabinets during the year. What is the ABC cost for Processing orders?