Question

Chapter 7: 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	16	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 16?

(b) What is the product margin under the traditional costing system when the number of orders increases to 16?

Answer 1

	Total	Assembling Units	Processing Orders	Supporting Customers	Other
Manufacturing overhead	$500,000	50%	35%	5%	10%
Manufacturing overhead		250,000	175,000	25,000	50,000
Total activity		1,000	250	100
		units	orders	customers
Manufacturing overhead per activity		250	700	250
Selling and administrative overhead	300000	10%	45%	25%	20%
Selling and administrative overhead		30,000	135,000	75,000	60,000
Total activity		1,000	250	100
		units	orders	customers
Manufacturing overhead per activity		30	540	750
ans 1
Customer Margin
Sales (80*595)		47600
Less: Direct Material (80*180)	14400
Less: Direct Labor (80*50)	4000
Less: Manufacturing overhead
Assembling (250*80)	20000
Processing (16*700)	11200
Supporting customer (250*1)	250
Selling and administrative overhead
Assembling (30*80)	2400
Processing (16*540)	8640
Supporting customer (750*1)	750	61640
Customer loss		-14040
ans 2 based on total units
Customer Margin
Sales (80*595)		47600
Less: Direct Material (80*180)	14400
Less: Direct Labor (80*50)	4000
Less: Manufacturing overhead
(500000/1000*80)	40000
Selling and administrative overhead
(300000/1000*80)	24000	82400
Customer loss		-34800