Question

Ranada company manufactures and sells sportswear products. ranada uses activity-based costing to determine the cost of the customer return processing and the shipping activity. the customer return processing activity has an activity rate of $45 per return, and the shipping activity has an activity rate of $10 per shipment. ranada shipped 3,000 units of product 1 in 1,200 shipments (some shipments are more than one unit). there were 150 returns. determine the total activity costs for the return and shipping activities of product 1.

Answer 1

The total activity costs for the return and shipping activities of product 1 are -

Total activity costs for the return and shipping activities = (Per return costs X number of returns) + (Per shipping costs X number of shipments)

Total activity costs for the return and shipping activities = ($ 45 X 150 returns) X ($ 10 X 1,200 shipments)

Total activity costs for the return and shipping activities = $ 18,750