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In: Accounting

Cancico Communications has supplied the following data for use in its ABC system: Overhead Costs   Wages...

Cancico Communications has supplied the following data for use in its ABC system:

Overhead Costs
  Wages and salaries $ 300,000
  Other overhead costs 165,000
  Total overhead costs $ 465,000
  Activity Cost Pool Activity Measure Total Activity
  Direct labour support   Number of direct labour-hours 12,300 DLHs
  Order processing   Number of orders 500 orders
  Customer support   Number of customers 180 customers
  Other   These costs are not allocated
     to products or customers		 NA
Distribution of Resource Consumption
across Activity Cost Pools
Direct
Labour
Support		 Order
Processing		 Customer
Support		 Other Total
  Wages and salaries 15 % 40 % 35 % 10 % 100 %
  Other overhead costs 10 % 25 % 25 % 40 % 100 %

During the year, Cancico Communications completed an order for special telephone equipment for a new customer, HurnTel. This customer did not order any other products during the year. Data concerning that order follow:

  Selling price $ 217 per unit
  Units ordered 190 units
  Direct materials $ 196 per unit
  Direct labour-hours 0.6 DLH per unit
  Direct labour rate $ 26 per DLH

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. (Round your answers to 2 decimal places.)

3. Prepare a report showing the overhead costs for the order from HurnTel, including customer support costs. (Round your answers to 2 decimal places.)

4. Prepare a report showing the customer margin for HurnTel. (Round your answers to 2 decimal places.)

Solutions

Expert Solution

1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools

Direct
Labour
Support		 Order processing Customer support Other Total
Wages and salaries 45000 120000 105000 30000 300000
Other overhead costs 16500 41250 41250 66000 165000
Total 61500 161250 146250 96000 465000

2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

Activity rate
Direct labour support (61500/12300) 5 per labour hour
Order processing (161250/500) 322.50 per order
Customer support (146250/180) 812.50 per customer

3. Prepare a report showing the overhead costs for the order from HurnTel, including customer support costs. (Round your answers to 2 decimal places.)

Overhead
Direct labour support 190*.6*5 = 570
Order processing 322.50
Customer support 812.50
Total overhead 1705

4. Prepare a report showing the customer margin for HurnTel. (Round your answers to 2 decimal places.)

Sales (190*217) 41230
Direct material (190*196) 37240
Direct labour (190*.6*26) 2964
Overhead 1705
Customer margin -679

ekkarill92 answered 2 years ago
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