Required: 1. Prepare a report showing the first-stage allocations of overhead co

Question

Required:

1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. Calculate the total overhead costs for the order from Shenzhen Enterprises including customer support costs.

4. Calculate the customer margin for Shenzhen Enterprises.

Overhead Costs Wages and salaries Other overhead costs Total overhead costs 300,000 100,000 400,000 Total Activity for the Year Activity Cost Pool Supporting direct labor Order processing Customer support Other Activity Measure Number of direct labor-hours Number of customer orders Number of customers This is an organization- 20,000 DLHs 400 orders 200 customers Not applicable sustaining activity Distribution of Resource Consumption Across Activities Supporting Direct LaborProcessing Order Customer Other 10% 40 Total 100 100% Support Wages and salaries Other overhead costs 40% 30 308 10s 20 20 During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products during the year. Data concerning that order follow: Data Concerning the Shenzhen Enterprises Order Units ordered Direct labor-hours Selling price Direct materials Direct labor 10 units 2 DLHs per unit $ 300 per unit $ 180 per unit $ 50 per unit

Explanation / Answer

STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF SUPPORTING LABOUR ORDER PROCESSING CUSTOMER SUPPORT OTHERS TOTAL APPORTION IN $ IN $ IN $ IN $ IN $ Wages and salaries 40:30:20:10 120,000 90,000 60,000 30,000 300,000 Other Overheads cost 30:10:20:40 30,000 10,000 20,000 40,000 100,000 TOTAL COST OF ACTIVITY 150,000 100,000 80,000 70,000 400,000 STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Supporting labour DLH 150,000 20,000 7.50 order processing Orders 100,000 400 250.00 Customer Support Customers 80,000 200 400.00 Customer margin: sales revenue (10 units @ 300) 3,000 Less: material (10 units @180) -1,800 Less: labour (10 units @ 50 unit) -500 OH assigned: Supporting labour (20 DLH @7.50) -150 Order Processing (1 order @250) -250 Customer Support (1 customer @400) -400 Net Customer margin -100

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