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	$	920,000
Vehicle operating expense		350,000
Vehicle depreciation		230,000
Customer representative salaries and expenses		260,000
Office expenses		120,000
Administrative expenses		420,000
Total cost	$	2,300,000

  

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

Cost Allocation					.
	Total	Travel	Pickup and Delivery	Customer Service	Other
Driver and guard wages	920000	460000	322000	92000	46000
	100%	920000*50%	920000*35%	920000*10%	920000*5%
Vehicle Operating Expenses	350000	245000	17500	0	87500
	100%	350000*70%	350000*5%	0%	350000*25%
Vehicle Depreciation	230000	138000	34500	0	57500
	100%	230000*60%	230000*15%	0%	230000*25%
Customer Representative salaries and expenses	260000	0	0	234000	26000
	100%	0%	0%	260000*90%	260000*10%
Office Expenses	120000	0	24000	36000	60000
	100%	0%	120000*20%	120000*30%	120000*50%
Administrative Expenses	420000	0	21000	252000	147000
	100%	0%	420000*5%	420000*60%	420000*35%
Total Cost	2300000	843000	419000	614000	424000