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:

The distribution of resource consumption across the activity cost pools is as follows: 

Required :

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

Answer 1

Here in activity costing concept we allocate our fixed cost overheads in the ratio of activity cost pool so that we can find actual cost per unit for each activity of business:

The solution for above solution is as under:-

Particulars	Travel (amount in $)	Pickup and delivery (amount in $)	Customer service (amount in $)	Other (amount in $)	Totals (amount in $)
Driver and guard wages	420,000	294,000	84000	42,000	840,000
Vehicle operating expense	189,000	13,500	-	67,500	270,000
Vehicle deprecation	90,000	22,500	-	37,500	150,000
Customer representative salaries and expenses	-	-	162,000	18,000	180,000
Office expenses	-	8,000	12,000	20,000	40,000
Administrative expenses	-	17,000	204,000	119,000	340,000
Total cost	699,000	355,000	462,000	304,000	1,820,000