Question

Aziz Company sells two types of products, Basic and Deluxe. The company provides technical support for users of its products, at an expected cost of exist150,000 per year. The company expects to process 10,000 customer service calls per year. Required: Determine the company's cost of technical support per customer service call. During the month of January, Aziz received 450 calls for customer service on its Deluxe model, and 150 calls for customer service on its Basic model. Assign technical support costs to each model using activity-based costing (ABC).

Answer 1

Answer:

Req 1 15 $ cost per call

Req 2 Delux = 6,750$ and Basic 2,250$.

Explanation:

This question has two requirement one is to determine the company's cost of technical support per customer service call (Req 1) and the other is to assign technical support cost to each model using activity based costing (Req 2).

Req 1

The first requirement is quite simple. Cost of technical support per customer service call can be determine by dividing expected cost with expected number of customer service call we can get our answer

Cost per CSC =150000/10000 = 15

Req 2

Activity-based costing (ABC) is a costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

In this question company has two product i.e delux and basic model. Cost for each product can be determine by multplying cost per csc with number of call received for each product.

Delux= 450*15 = 6750

Basic= 150*15 = 2250