Answer:
1. Direct labor Support $150,000
Order processing $100,000
Customer Support $80,000
Other $70,000
Totals $400,000
2. Activity cost pool Activity rate
Supporting direct labor $ 7.50 per DLH
Order processing $ 250 per order
Customer Support $ 400 per customer
3. Overhead cost $800
4.$-100
Explanation:
1. Prepare of the report showing the first-stage allocations of overhead costs to the activity cost pools.
Direct labor Support Order processing Customer Support Other Totals
Wages and salaries $120,000 $90,000 $60,000 $ 30,000 $300,000
(40%*$300,000=$120,000)
(30%*$30,000=$90,000)
(20%*$300,000=$60,000)
(10%*$300,000=$30,000)
(100*$300,000=$300,000)
Other overheads cost $ 30,000 $10,000 $20,000 $ 40,000 $ 100,000
(30%*$100,000=$30,000)
(10%*$100,000=$10,000)
(20%*$100,000=$20,000)
(40%*$100,000=$40,000)
(100%*$100,000=$100,000)
TOTAL COST $150,000 $100,000 $80,000 $70,000 $400,000
Therefore the first-stage allocations of overhead costs to the activity cost pools are :
Direct labor Support $150,000
Order processing $100,000
Customer Support $80,000
Other $70,000
Totals $400,000
2. Computation for the activity rates for the activity cost pools.
Activity cost pool Activity rate
Supporting direct labor $ 7.50 per DLH
($150,000/20,000=$ 7.50)
Order processing $ 250 per order
($100,000/400=$250)
Customer Support $ 400 per customer
($80,000/200=$400)
Therefore the activity rates for the activity cost pools are:
Activity cost pool Activity rate
Supporting direct labor $ 7.50 per DLH
Order processing $ 250 per order
Customer Support $ 400 per customer
3. Preparation of a report showing the overhead costs for the order from Shenzhen Enterprises including customer support costs.
Activity cost pool ABC cost
Supporting direct labor $150
($7.50*2*10)
Order processing $250
($100,000/400=$250)
Customer Support $400
($100,000/200=$400)
Overhead cost $ 800
($150+$250+$400)
Therefore the overhead costs for the order from Shenzhen Enterprises including customer support costs is $800
4. Preparation of a report showing the customer margin for Shenzhen Enterprises
Shenzhen Enterprises
Customer Margin - ABC Analysis
Sales (10* $300) 3,000
Less Costs:
Direct materials (10*$180) $1,800
Direct labor (10 * $50) $ 500
Overhead cost $800
($150+$250+$400)
Total cost ($3,100)
Customer margin $-100
($3,000-$3,100)
Therefore the customer margin for Shenzhen Enterprises is $-100
