EXERCISE 7-2 First Stage Allocation LO7-2 SecuriCorp operates a fleet of armored

Question

EXERCISE 7-2 First Stage Allocation LO7-2 SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activ- ity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery Chapter 7 cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries and expenses Office expenses. Administrative expenses Total cost $ 720,000 280,000 120,000 160,000 30,000 320,000 $1,630,000 The distribution of resource consumption across the activity cost pools is as follows: Pickup and Customer Travel Delivery Service Other Totals 5% 100% 25% 100% 25% 100% 35% 5% 15% 10% Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries 50% 70% 60% 0% 0% 90% and expenses Office expenses 0% 0% 10% 50% 35% 100% 100% 100% 5% 60% Complete the first stage allocations of costs to activity cost pools as illustrated in Exhibit 7-6.

Explanation / Answer

FIRST STAGE ALLOCATIONS OF COSTS TO ACTIVITY COST POOL: Travel Pick up and delivery Customer service Other Total Driver and guard wages 360000 252000 72000 36000 720000 Vehicle operating expense 196000 14000 0 70000 280000 Vehicle depreciation 72000 18000 0 30000 120000 Customer representative salaries and expenses 0 0 144000 16000 160000 Office expenses 0 6000 9000 15000 30000 Administrative expenses 0 16000 192000 112000 320000 Total costs of Cost Pool 628000 306000 417000 279000 1630000

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