Question

Nerrod Company sells its products at $740 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs:

Activity	Cost Driver and Rate
Sales calls	$	520	per visit
Order processing	$	160	per order
Deliveries	$	55	per order + $0.50 per mile
Sales returns	$	70	per return and $3.00 restocking per unit returned

Nerrod Company has gathered the following data pertaining to activities it performed for two of its customers:

	XBT		NINTO
Number of orders	22		2
Number of parts per order	620		2,120
Sales returns:
Number of returns	4		10
Number of units returned	40		50
Number of sales calls	9		5
Miles per delivery	10		20
Shipping terms	FOB, Factory		FOB, Destination

What is Nerrod's total customer batch-level cost applicable to Ninto?

• $1,150.

• $1,140.

• $2,520.

• $2,640.

• $6,520.

Answer 1

Answer
The Correct Option is A : $1,150
Explanation
Nerrod		A	B	C=A*B
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Order Processing	Number of orders	$         160	2	$                320
Deliveries- On Order	Number of orders	$           55	2	$                110
Deliveries- On Miles	Number of miles	$             1	40	$                  20
Sales Returns- On Return	Number of returns	$           70	10	$                700
Customer batch level cost for NINTO				$             1,150
So answer is $ 1,150
Option A is correct