Question

Cade Industries operates a fleet of delivery vehicles that make scheduled pickups and deliveries for its customers in the Boulder 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 as follows for each of the cost pools: Travel – Miles; Pickups and Deliveries - # of Pickups and Deliveries; Customer Service - # of Customers. 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	$1,680,000
Vehicle Operating Expense	540,000
Vehicle Depreciation	300,000
Customer Reps Salaries and Expenses	360,000
Office Expenses	80,000
Administrative Expenses	680,000
Total	$3,640,000

The distribution of resource consumption across the activity cost pools is as follows:

	Travel	Pickup and Delivery	Customer Service	Other	Total
Driver and Guard Wages	40%	45%	10%	5%	100%
Vehicle Operating Expense	75%	5%	0%	20%	100%
Vehicle Depreciation	70%	10%	0%	20%	100%
Customer Reps Salaries and Expenses	0%	0%	85%	15%	100%
Office Expenses	0%	25%	35%	40%	100%
Administrative Expenses	0%	5%	55%	40%	100%

1. If the company had the following activity, complete the Second Stage Allocations. Calculate to the nearest tenth of a penny.
   1. Miles Driven – 1,000,000
   2. Pickups and Deliveries – 5,000
   3. Number of Customers – 1,500
2. During 2018, Cade completed a number of deliveries for one of it’s customer’s Tank 7 Industries. Cade calculates revenues based on the miles driven. During the year, Cade drove 25,000 miles on 30 deliveries for Tank 7 Industries. Cade charges a premium on any deliver that is 250 miles or less of $100/delivery. Six of Tank 7’s deliveries were subject to this $100 surcharge. Cade charges Tank 7 $1.75/mile driven (plus any surcharges). Determine the profitability of Tank 7 Industries in 2018 for Cade.
3. Just do question 2. Please show all work

Answer 1

Travel
	Total Cost	Multiply: Percentage	Cost
Driver and Guard Wages	$        1,680,000	40%	$           672,000
Vehicle Operating Expense	$            540,000	75%	$           405,000
Vehicle Depreciation	$            300,000	70%	$           210,000
Customer Reps Salaries and Expenses	$            360,000	0%	$                       -
Office Expenses	$              80,000	0%	$                       -
Administrative Expenses	$            680,000	0%	$                       -
Total Cost			$       1,287,000
Divided by: Miles Driven			1,000,000
Cost per Mile			$                1.287
Pickup and Delivery
	Total Cost	Multiply: Percentage	Cost
Driver and Guard Wages	$        1,680,000	45%	$           756,000
Vehicle Operating Expense	$            540,000	5%	$             27,000
Vehicle Depreciation	$            300,000	10%	$             30,000
Customer Reps Salaries and Expenses	$            360,000	0%	$                       -
Office Expenses	$              80,000	25%	$             20,000
Administrative Expenses	$            680,000	5%	$             34,000
Total Cost			$           867,000
Divided by: Pickups and Deliveries			5,000
Cost per Pickups and Deliveries			$           173.400
Customer Service
	Total Cost	Multiply: Percentage	Cost
Driver and Guard Wages	$        1,680,000	10%	$           168,000
Vehicle Operating Expense	$            540,000	0%	$                       -
Vehicle Depreciation	$            300,000	0%	$                       -
Customer Reps Salaries and Expenses	$            360,000	85%	$           306,000
Office Expenses	$              80,000	35%	$             28,000
Administrative Expenses	$            680,000	55%	$           374,000
Total Cost			$           876,000
Divided by: Number of Customers			1,500
Cost per Customer			$           584.000
Customer Service
	Number of Cost driver	Multiply: Cost driver rate	Alloacted Cost
Travel	25,000	$          1.287	$             32,175
Pickup and Delivery	30	$     173.400	$                5,202
Customer Service	1	$     584.000	$                   584
Cost allocated to Tank 7 Industries			$             37,961
Revenue
Normal revenue (25000*1.75)		$       43,750
surcharge revenue (6*100)		$             600
Total Revenue from Tank 7 Industries			$             44,350
Less: Cost allocated to Tank 7 Industries			$             37,961
Profitability of Tank 7 Industries in 2018 for Cade			$                6,389