Question

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages $ 1,180,000 Vehicle operating expense 610,000 Vehicle depreciation 490,000 Customer representative salaries and expenses 520,000 Office expenses 380,000 Administrative expenses 680,000 Total cost $ 3,860,000 The distribution of resource consumption across the activity cost pools is as follows: Travel Pickup and Delivery Customer Service Other Totals Driver and guard wages 50 % 35 % 10 % 5 % 100 % Vehicle operating expense 70 % 5 % 0 % 25 % 100 % Vehicle depreciation 60 % 15 % 0 % 25 % 100 % Customer representative salaries and expenses 0 % 0 % 90 % 10 % 100 % Office expenses 0 % 20 % 30 % 50 % 100 % Administrative expenses 0 % 5 % 60 % 35 % 100 % Required: Complete the first stage allocations of costs to activity cost pools.

Answer 1

Solution:

First stage allocation of cost to activity cost pools
Particulars	Total Cost	Travel		Pickup and Delivery		Customer Service		Other
		%	Amount	%	Amount	%	Amount	%	Amount
Driver and Guard Wages	$1,180,000.00	50%	$590,000.00	35%	$413,000.00	10%	$118,000.00	5%	$59,000.00
Vehicle Operating Expense	$610,000.00	70%	$427,000.00	5%	$30,500.00	0%	$0.00	25%	$152,500.00
Vehicle Depreciation	$490,000.00	60%	$294,000.00	15%	$73,500.00	0%	$0.00	25%	$122,500.00
Customer representative salaries and expenses	$520,000.00	0%	$0.00	0%	$0.00	90%	$468,000.00	10%	$52,000.00
Office Expenses	$380,000.00	0%	$0.00	20%	$76,000.00	30%	$114,000.00	50%	$190,000.00
Administrative Expenses	$680,000.00	0%	$0.00	5%	$34,000.00	60%	$408,000.00	35%	$238,000.00
Total	$3,860,000.00		$1,311,000.00		$627,000.00		$1,108,000.00		$814,000.00