Question

Assume that OfficeMart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 8. (Prior to completing this requirement, change all worksheet figures back to their original amounts.)

A B C D E 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Chapter : Applying Excel Data 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 8 orders Number of filing cabinets ordered in total 80 units Selling price $595 Direct materials $180 Direct labor $50

(a) What is the customer margin under activity-based costing when the number of orders increases to 8? (Enter a loss as a negative amount.)

(b) What is the product margin under the traditional costing system when the number of orders increases to 8? (Enter a loss as a negative amount.)

(c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease.unanswered

If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will decrease.unanswered

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected.unanswered

If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected.unanswered

3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 35% from 45% and the percentage attributable to supporting customers should be changed to 35% from 25%.

(a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.)

(b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.)

(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost pool to the supporting customers cost pool.unanswered

When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently.unanswered

When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less frequently.

Answer 1

As per policy, we cannot able to post solution more than one question.

As per policy, we cannot able to post solution more than one question.

	Assembling Units	Processing Orders	Supporting Customers	Other
Manufacture overhead (cost allocated 50:35:5:10)	250,000	175000	25000	50000
Selling and administrative overhead (cost allocated to 10:45:25:20 respectively.)	30000	135000	75000	60000
Total cost	280,000	310,000	100,000	110,000
Total activity	1,000	250	100
Cost driver rate (total cost / total activity)	$       280.00	$   1,240.00	$ 1,000.00

Selling price per unit	595
Less: direct material	180
Less: direct labor	50
Contribution margin per unit	365
Number of unit sold	80
Contribution margin (365*80)	29200
Less:
Assembling Units (280*80 units)	-22400
Processing Orders (1240*8 orders)	-9920
Supporting Customers	-1000
Customer margin under activity based costing (loss)	-4120

Correct statement

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease

Number of order increase which impact on cost of processing order increase. Resulting customer margin under activity based costing is decreased.

Selling price per unit	595
Less: direct material	180
Less: direct labor	50
Less: manufacture overhead per unit (500000/1000)	500
Product margin per unit under traditional costing	-135
Selling and administration cost should not considered for product cost under traditional costing

total product margin = (-135)*1000 = (-135000)