Activity-Based Costing: Selling and Administrative Expenses Comfort Step Company

Question

Activity-Based Costing: Selling and Administrative Expenses Comfort Step Company manufactures and sells shoes. Comfort Step uses activity-based costing to determine the cost of the sales order processing and the shipping activity. The sales order processing activity has an activity rate of $84 per sales order, and the shipping activity has an activity rate of $20 per shipment. Comfort Step sold 10,000 units of walking shoes, which consisted of 5,800 orders and 500 shipments a. Determine the total sales order processing and shipping activity cost for walking shoes b. Determine the per-unit sales order processing and shipping activity cost for walking shoes. If required, round your answer to the nearest cent per unit

Explanation / Answer

1.a.total sales order processing cost and shipping actitivity cost :

($84 per sales order * 5,800 orders) + ($20 per shipment * 500 shipments)

=>$487,200+ $10,000

=>$497,200.

b.per unit sales order processing and shipping activity cost for walking shoes.

=>total cost / total units

=>$497,200 / 10,000

=>$49.72.

2..total monthly activity based cost for Lawson during month.

=> (9 teller transactions * $2.80 per teller transaction) + (91 cancelled checks * $0.16 per cancelled check) + (12 ATM transactions * $0.08 per ATM transaction)

=>$25.20 + $14.56 + $0.96

=>$40.72.

3.

a.activity rate of sales order processing activity = $254,800 / 18,200

=>$14 per sales order.

b.amount of sales order processing cost if it had 10,400 sales orders.

=>$14 per sales order * 10,400 sales order

=>$145,600.

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