Question

In: Accounting

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los...

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.

Solutions

Expert Solution

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


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