Question

Manufacturing overhead	$500,000
Selling and administrative overhead	$300,000
	Assembling Units	Processing Orders	Supporting Customers	Other
Manufacturing overhead	50%	35%	5%	10%
Selling and administrative overhead	10%	45%	25%	20%
Total activity	1,000	250	100
	units	orders	customers
OfficeMart orders:
Customers	1	customer
Orders	4	orders
Number of filing cabinets ordered in total	80	units
Selling price	$595
Direct materials	$180
Direct labor	$50

Determine the customer margin for the OfficeMart orders under Activity-Based Costing
Sales		?
Costs:
Direct materials	?
Direct labor	?
Unit-related overhead	?
Order-related overhead	?
Customer-related overhead	?	?
Customer margin		?

Answer 1

Determine the customer margin for the OfficeMart orders under Activity-Based Costing
	Amount($)	Amount($)
Sales(80*595)		47,600
Costs:
Direct materials(180*80)	14,400
Direct labor(50*80)	4,000
Unit-related overhead (WN)	22,400
Order-related overhead (WN)	4,960
Customer-related overhead (WN)	1,000	46,760
Customer margin		840

Working note (W.N)
Activity-Based Costing
Perform the first stage allocations
Particulars	Assembling Units	Processing Orders	Supporting Customers	Other	Total
Manufacturing overhead(A)	50%	35%	5%	10%
Selling and administrative overhead(B)	10%	45%	25%	20%
Manufacturing overhead(500000*A)	2,50,000	1,75,000	25,000	50,000	5,00,000
Selling and administrative overhead(300000*B)	30,000	1,35,000	75,000	60,000	3,00,000
Total cost	2,80,000	3,10,000	1,00,000	1,10,000	8,00,000
Compute the activity rates
Activity Cost Pools	Total Cost	Total Activity		Activity Rate
Assembling units	2,80,000	1,000	units	280	per unit
Processing orders	3,10,000	250	orders	1,240	per order
Supporting customers	1,00,000	100	customers	1,000	per customer
Compute the overhead cost attributable to the Office Mart orders
Activity Cost Pools	Activity Rate		Activity		ABC Cost
Assembling units	280	per unit	80	units	22,400
Processing orders	1,240	per order	4	orders	4,960
Supporting customers	1,000	per customer	1	customer	1,000