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Cancico Communications has supplied the following data for use in its ABC system: Overhead Costs   Wages...

Cancico Communications has supplied the following data for use in its ABC system:
Overhead Costs
  Wages and salaries $ 312,500
  Other overhead costs 170,000
  Total overhead costs $ 482,500
  Activity Cost Pool Activity Measure Total Activity
  Direct labour support   Number of direct labour-hours 5,675 DLHs
  Order processing   Number of orders 500 orders
  Customer support   Number of customers 160 customers
  Other   These costs are not allocated
     to products or customers		 NA               
Distribution of Resource Consumption
across Activity Cost Pools
Direct
Labour
Support		 Order
Processing		 Customer
Support		 Other Total
  Wages and salaries 10 % 45 % 40 % 5 % 100 %
  Other overhead costs 15 % 20 % 20 % 45 % 100 %

     During the year, Cancico Communications completed an order for special telephone equipment for a new customer, HurnTel. This customer did not order any other products during the year. Data concerning that order follow:
  Selling price $ 224 per unit
  Units ordered 215 units
  Direct materials $ 196 per unit
  Direct labour-hours 0.6 DLH per unit
  Direct labour rate $ 31 per DLH
Required:
1.

Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.


    

2.

Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)


     

3.

Prepare a report showing the overhead costs for the order from HurnTel, including customer support costs. (Round your answers to 2 decimal places.)

  
     

4.

Prepare a report showing the customer margin for HurnTel. (Round your answers to 2 decimal places.)


     

Solutions

Expert Solution

1.

Direct Labor Support Order Processing Customer Support Other Total
Wages and salaries 31250 140625 125000 15625 312500
Other overhead costs 25500 34000 34000 76500 170000
Total cost $ 56750 174625 159000 92125 482500

2.

Activity Cost Pool Activity Cost $ Total Activity Activity Rate $
Direct labor support 56750 5675 10.00 per DLH
Order processing 174625 500 349.25 per order
Customer support 159000 160 993.75 per customer

3.

Activity Cost Pool Activity Rate $ Activity Cost $
Direct labor support 10.00 per DLH 129 1290.00
Order processing 349.25 per order 1 349.25
Customer support 993.75 per customer 1 993.75
Total 2633.00

4.

Sales (215 x $224) 48160.00
Costs:
Direct materials (215 x $196) 42140.00
Direct labor (215 x 0.6 x $31) 3999.00
Direct labor support overhead 1290.00
Order processing overhead 349.25
Customer support overhead 993.75 48772.00
Customer margin $ -612.00

ekkarill92 answered 1 year ago
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