Question

MovieTime Corporation produces furniture and fixtures for home theatre installations. John Jones, the owner of the company, recognized a trend in home theatre installations starting about three years ago and began working with local design firms and home builders to offer affordable yet high-quality furnishings for new construction and renovation markets. The company’s most popular product is a leather upholstered recliner with a cup holder and snack tray built into each chair’s arms. Last year, John decided to implement an ABC system to better understand the overall cost structure and to ensure he was charging competitive prices that would also allow the firm to remain profitable over the longer term. The ABC system is designed to allow direct material and direct labour to be traced directly to each of the company’s four main products. The system also includes four activity cost pools for overhead: Quality Control and Inspection, Order Processing, Delivery and Installation, and Other. The activity measures are units produced for Quality Control and Inspection, number of orders for Order Processing, and number of deliveries for Delivery and Installation. The Other cost pool has no activity measure. The following costs will be assigned using the ABC system:
Indirect Factory Salaries. . . . . . . . . . . . . . .. . .... $ 520,000
Delivery crew wages Expense. . . . .. . . . . . . .... 140,000
Delivery vehicle operating expenses and depreciation.... 95,000
Procurement and order processing salaries Expense. . .... 103,000
Office Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .... 25,000
Other administrative expenses . . . . . . . . . . . . . . . . . . . ... . 225,000
Total Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,108,000
The distribution of resource consumption across the activity cost pools is as follows:
Required:
Carry out the first-stage allocations of costs to activity cost pools as illustrated in Exhibit.


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  • CreatedJuly 08, 2015
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