Question

MobileCash Corporation operates a fleet of armoured cars that make scheduled pickups and deliveries for its customers. The company is implementing an ABC system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are kilometers 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. The following costs will be assigned using the ABC system:

Driver and guard wages	$	897,000
Vehicle operating expense		308,000
Vehicle depreciation		169,000
Customer representative salaries and expenses		199,000
Office expenses		49,500
Administrative expenses		378,000
Total cost	$	2,000,500

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

	Travel			Pickup and Delivery			Customer Service			Other			Totals
Driver and guard wages		35	%		45	%		15	%		5	%		100	%
Vehicle operating expense		65	%		10	%		0	%		25	%		100	%
Vehicle depreciation		65	%		10	%		0	%		25	%		100	%
Customer representative salaries     and expenses		0	%		0	%		75	%		25	%		100	%
Office expenses		0	%		25	%		35	%		40	%		100	%
Administrative expenses		0	%		15	%		45	%		40	%		100	%

Answer 1

Solution:

Allocation of Overhead based on the given percentage

	Travel	Pickup and Delivery	Customer Service	Other	Total
Driver and guard wages	$313,950 (897,000*35%)	$403,650 (897000*45%)	$134,550 (897000*15%)	$44,850 (897000*5%)	$897,000
Vehicle operating expense	$200,200 (308000*65%)	$30,800 (308000*10%)	$0	$77,000 (308000*25%)	$308,000
Vehicle depreciation	$109,850 (169000*65%)	$16,900 (169000*10%)	$0	$42,250 (169000*25%)	$169,000
Customer representative salaries and expenses	$0	$0	$149,250 (199000*75%)	$49,750 (199000*25%)	$199,000
Office expenses	$0	$12,375 (49500*25%)	$17,325 (49500*35%)	$19,800 (49500*40%)	$49,500
Administrative expenses	$0	$56,700 (378000*15%)	$170,100 (378000*45%)	$151,200 (378000*40%)	$378,000

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you