Question

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles 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 guard wages	$	980,000
Vehicle operating expense		410,000
Vehicle depreciation		290,000
Customer representative salaries and expenses		320,000
Office expenses		180,000
Administrative expenses		480,000
Total cost	$	2,660,000

  

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	50	%	35	%	10	%	5	%	100	%
Vehicle operating expense	70	%	5	%	0	%	25	%	100	%
Vehicle depreciation	60	%	15	%	0	%	25	%	100	%
Customer representative salaries and expenses	0	%	0	%	90	%	10	%	100	%
Office expenses	0	%	20	%	30	%	50	%	100	%
Administrative expenses	0	%	5	%	60	%	35	%	100	%

  

Required:

Complete the first stage allocations of costs to activity cost pools.

Answer 1

Calculation:
Driver and Guard Wages:
Travel = $980,000 * 50% = $490,000
Pickup and Delivery = $980,000 * 35% = $343,000
Customer Service = $980,000 * 10% = $98,000
Other = $980,000 * 5% = $49,000

Vehicle Operating Expense:
Travel = $410,000 * 70% = $287,000
Pickup and Delivery = $410,000 * 5% = $20,500
Customer Service = $410,000 * 0% = $0
Other = $410,000 * 25% = $102,500

Vehicle Depreciation:
Travel = $290,000 * 60% = $174,000
Pickup and Delivery = $290,000 * 15% = $43,500
Customer Service = $290,000 * 0% = $0
Other = $290,000 * 25% = $72,500

Customer Representative Salaries and Expense:
Travel = $320,000 * 0% = $0
Pickup and Delivery = $320,000 * 0% = $0
Customer Service = $320,000 * 90% = $288,000
Other = $320,000 * 10% = $32,000

Office Expense:
Travel = $180,000 * 0% = $0
Pickup and Delivery = $180,000 * 20% = $36,000
Customer Service = $180,000 * 30% = $54,000
Other = $180,000 * 50% = $90,000

Administrative Expense:
Travel = $480,000 * 0% = $0
Pickup and Delivery = $480,000 * 5% = $24,000
Customer Service = $480,000 * 60% = $288,000
Other = $480,000 * 35% = $168,000