40% from 25% 1 Chapter 7: Applying Excel 2 3 Data 4 Manufacturing overhead 5 Sel

ID: 2342131 • Letter: 4

Question

40% from 25% 1 Chapter 7: Applying Excel 2 3 Data 4 Manufacturing overhead 5 Selling and administrative overhead $500,000 $300,000 Assembling Processing Supporting Customers 7 Units Orders Other 50% 10% 1,000 units 35% 30% 250 orders 8 Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 5% 40% 100 customers 10% 20% 12 13 OfficeMart orders: 14 Customers 15 Orders 16 Number of filing cabinets ordered in total 17 Selling price 18 Direct materials 19 Direct labor 20 1 customer 8 orders 80 units $595 $180 $50 (a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.) Customer margin under activity-based costing

Explanation / Answer

(a)

Assembling Units

Processing Orders

Supporting Customers

Others

Manufacturing O/H

(500000 * 50%)

=250000

(500000 * 35%)

=175000

(500000 * 5%)

=25000

(500000 * 10%)

=50000

S & A O/H

(300000 * 10%)

=30000

(300000 * 30%)

=90000

(300000 * 40%)

=120000

(300000 * 20%)

=60000

Total (A)

280000

265000

145000

110000

Total Activity (B)

1000 units

250 orders

100 customers

Cost/Activity (A/B)

280

1060

145

Selling Price (595 * 80)

47600

(-) Direct Material (180 * 80)

14400

(-) Direct Labour (80 * 50)

4000

(-) Overhead :

Assembling (80 units * 280)

22400

Processing orders (8 orders * 1060)

8480

Supporting customers

145

Margin

(1825)

(b)