Question

I WOULD HAVE SEPERATED THE QUESTIONS BUT UNFORTUNATELY ALL OF THESE QUESTIONS/PROBLEMS SEEMED TO BE RELATED WITH EACH OTHER.

Problem 1

Ambulance Services of America (ASA) operates a fleet of ambulances that make scheduled pickups and deliveries for its customers (nursing homes, hospitals, etc.) in the Pennsylvania 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 first-aid worker wages	$840,000
Vehicle operating expense	270,000
Vehicle depreciation	150,000
Customer representative salaries and expenses	180,000
Office expenses	40,000
Administrative expenses	340,000
Total cost	$1,820,000

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

	Travel	Pickup and Delivery	Customer Service	Other	Total
Driver and first-aid worker wages	40%	45%	10%	5%	100%
Vehicle operating expense	75%	5%	0%	20%	100%
Vehicle depreciation	70%	10%	0%	20%	100%
Customer representative salaries and expenses	0%	0%	85%	15%	100%
Office expenses	0%	25%	35%	40%	100%
Administrative expenses	0%	5%	55%	40%	100%

Required:

Complete the first-stage allocations of cost to activity cost pools as illustrated in Exhibit 6-6. (Hint: Complete the following table):

	Travel	Pickup & Delivery	Customer Service	Other	Total
Driver and first-aid worker wages
Vehicle operating expense
Vehicle depreciation
Customer representative salaries & expenses
Office expenses
Administrative expenses
Total cost

Problem 2

Ophthalmic Instruments and Supplies Corporation has supplied the following data for use in its activity-based costing system:

Overhead Costs
Wages and salaries	$350,000
Other overhead costs	200,000
Total overhead costs	$550,000

Activity Cost Pool	Activity Measure	Total Activity
Direct labor support	Number of direct labor-hours	10,000 DLHS
Order processing	Number of orders	500 orders
Customer support	Number of customers	100 customers
Other	This is an organizational-sustaining activity	Not applicable

	Distribution of Resource Consumption Across Activities
	Direct Labor Support	Order Processing	Costumer Support	Other	Total
Wages and salaries	30%	35%	25%	10%	100%
Other overhead costs	25%	15%	20%	40%	100%

During the year, Ophthalmic Instruments and Supplies Corporation completed an order for a special optical medical instrument for a new customer, Valley Grande Hospital. This customer did not order any other products during the year. Data concerning the order follow:

Data Concerning the Valley Grande Hospital Order
Selling price	$295 per unit
Units ordered	100 units
Direct materials	$264 per unit
Direct labor-hours	0.5 DLH per unit
Direct labor rate	$25 per DLH

Required:

1. Using Exhibit 6-6 as a guide, prepare a report showing the first-stage allocations of overhead cost to the activity pools. (Hint: Complete the following table):

	Direct Labor Support	Order Processing	Costumer Support	Other	Total
Wages and salaries
Other overhead costs
Total cost

2. Using Exhibit 6-7 as a guide, compute the activity rates for the activity cost pools. (Hint: Complete the following table):

Activity Cost Pool	Total Cost	Total Activity	Activity Rate
Direct labor support		10,000 DLHS
Order processing		500 orders
Customer support		100 customers

3. Using Exhibit 6-10 as a guide, prepare a report showing the overhead costs for the order from Valley Grande Hospital, including customer support costs. (Hint: Complete the following table):

Activity Cost Pool	(a) Activity Rate	(b) Activity	(a) x (b) ABC Cost
Direct labor support		50 DLHS*
Order processing		1 order
Customer support		1 customer
Total	////////////////////	////////////////////	$

*0.5 DLH per unit x 100 units= 50 DLHs

4. Using Exhibit 6-12 as a guide, prepare a report showing the customer margin for Valley Grande Hospital. (Hint: Complete the following table):

Sales (                                                                          )	$
Costs:
Direct materials (                                                     )
Direct labor (                                                            )
Direct labor support overhead
Order processing overhead
Customer support overhead
TOTAL COSTS	$
Customer margin	$

Answer 1