On Bored is a company that manufactures specialty desks for computer users that play a lot of
Question:
"On Bored" is a company that manufactures specialty desks for computer users that play a lot of computer games. The CEO of this company has decided to move to an Activity Based Costing system. The data from the new ABC system is listed below. Additionally, there are data from one of On Bored's customers, Procrastinet - a software developer, as well.
Overhead Costs | Cost |
Wages and Salaries | $350,000.00 |
Other Overhead Costs | $150,000.00 |
Total Overhead Costs | $500,000.00 |
Activity Cost Pool | Activity Measure | Total Activity for the Year |
Assembly | Number of Direct Labour Hours | 30,000 |
Delivery | Number of Customer Orders | 500 |
Customer Support | Number of Customers | 400 |
Other | costs not allocated to products or customers | N/A |
Distribution of Resource Consumption Across Activities | |||||
Volume-Related | Order-Related | Customer Support | Other | Total | |
Wages and Salaries | 30.00% | 20.00% | 40.00% | 10.00% | 100.00% |
Other Overhead Costs | 50.00% | 10.00% | 20.00% | 20.00% | 100.00% |
Data concerning Procrastinet's Order | ||
Units Ordered | 16 | units |
Direct Labour-Hours | 4 | DLHs per unit |
Selling Price | $450.00 | per desk |
Direct Materials | $225.00 | per desk |
Direct Labour | $12.00 | per hour |
Using the above data, complete the following in regards to On Bored:
- Create a report showing first-stage allocations of overhead costs to the activity cost pools.
- Compute the activity rates for the activity cost pools.
- Create a report showing the overhead costs for the order from Procrastinet.
- Create a report showing the product margin for the order and the customer margin for Procrastinet.
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver