Lim Chee Wah is conducting a study of order processing costs for his company, a wholesaler of Chinese handicrafts. He has identified that every new customer order triggers the following actions.
• Sales representatives generate customer orders and enter them into the system. The firm estimates that each of its six salespersons earns $65,000 annually. Total order volume in a typical year is 5,000 orders. Sales representatives spend 80% of their time in these activities.
• The shipping department assembles the various products contained in the order, and then packs and ships the order. The shipping department employs two people full time and occupies 12,000 square feet of warehouse space. These two persons are paid $40,000 each; warehouse rental and upkeep is $48,000 for the year. The employees believe that 70% of their time is devoted to assembling, packing, and shipping an order. They estimate the time needed to enter the order into the system and such at 20%. These employees are also responsible for the general upkeep of the warehouse (10% of time).
• The Accounting Department issues an invoice, once per month, for each customer who has placed an order or has an outstanding balance. This invoice lists all of the orders placed that month. Most customers place multiple orders each month. The accounting manager estimates her department’s budget at $140,000 and believes that invoicing and collections occupy 30% of her department’s time. She believes that 40% of her department’s effort is spent on coordinating purchases, 10% is spent on payroll, and 20% on general accounting and special projects.

Required:
Collecting all costs related to order processing in one pool and using expected activity levels as the denominator volume, compute the cost to process a customer order. Be sure to justify your choice if you exclude any of the costs listed above from the order processing cost pool.