Question

Marvin’s Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow:

Cost Driver volume

Activity Cost Driver Cost Driver Volume

Processing order Number of orders $ 126,000 9,000 orders

Loading truck Number of items 340,000 200,000 items

Delivering merchandise Number of orders 153,000 9,000 orders

Processing invoice Number of invoices 136,000 8,000 invoices

Total overhead $ 755,000

Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow:

City Diner Le Chien Chaud

Order value $ 89,000 $ 99,000

Number of orders 69 310

Number of items 600 1,900

Number of invoices 13 210

a. What would the delivery charge for each customer be under the current policy of 10 percent of order value? (please show work)

    Delivery charge per customer

City dinner ______

Le Chien Chaud _____

b. Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of delivering to each customer. (Do not round intermediate calculations.) ((Please show work))

  City Diner Lechin Chaud

Processing order    _____ _____

Loading truck _____   _____

Delivery Merchandise _____ ____

Processing invoice ____ ____

Total ____ ______

Answer 1

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Part a
		Order Value	rate	Cost
City Dinner		$      89,000	10%	$    8,900
Le Chien Chaud		$      99,000	10%	$    9,900
Part b
				City Dinner		Le Chien Chaud
Activity	Cost	Volume	Rate	Volume	Cost	Volume	Cost
Processing order	$126,000	9,000	$         14	69	$       966	310	$    4,340
Loading truck	$340,000	200,000	$           2	600	$    1,020	1,900	$    3,230
Delivering merchandise	$153,000	9,000	$         17	69	$    1,173	310	$    5,270
Processing invoice	$136,000	8,000	$         17	13	$       221	210	$    3,570
Total	$755,000				$    3,380		$ 16,410