Question

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 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. (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.) please put in graphs

Answer 1

Solution 1:

First stage allocation of cost to activity cost pools
Particulars	Total Cost	Direct labor support		Order Processing		Customer Support		Other
		%	Amount	%	Amount	%	Amount	%	Amount
Wages and Salaries	$300,000.00	15%	$45,000.00	40%	$120,000.00	35%	$105,000.00	10%	$30,000.00
Other overhead costs	$165,000.00	10%	$16,500.00	25%	$41,250.00	25%	$41,250.00	40%	$66,000.00
Total	$465,000.00		$61,500.00		$161,250.00		$146,250.00		$96,000.00

Solution 2:

Determination of activity rate for each activity
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate
					Direct labor support	$61,500.00	Nos of direct labor hours	12300	$5.00
Order Processing	$161,250.00	Nos of orders	500	$322.50
Customer Support	$146,250.00	Nos of customers	180	$812.50
Other	$96,000.00	No allocation
Total	$465,000.00

Solution 3:

Computation of overhead cost - Order from Hurntel
Particulars	Amount
Direct labor support overhead (190*0.6*$5)	$570.00
Order processing overhead	$322.50
Customer suppor overhead	$812.50
Total Cost	$1,705.00

Solution 4:

Customer Margin - Activity based costing
Particulars		Amount
Sales (190*$217)		$41,230.00
Costs:
Direct materials	$37,240.00
Direct labor	$2,964.00
Direct labor support overhead	$570.00
Order processing overhead	$322.50
Customer suppor overhead	$812.50
Total Cost		$41,909.00
Customer Margin		-$679.00