3 9 6 7 Boxes Limited produces collapsible storage boxes. The two most popular styles of storage boxes: Green and Blue. Boxes uses an ABC costing system and has the following overhead costs: Overhead Costs Manufacturing overhead Selling overhead Administrative overhead Total Overhead $500,000 $450,000 $240,000 $1,190,000 90 9 The company uses the following activity cost pools and drivers: 10 11 Activity cost pool Driver Total Activity Green Blue 12 Assembly Number of units 5,000 1,000 13 Setups Number of setups 4 Machining Machine hours 100 10,000 400 20 4,000 80 4,000 200 6,000 200 5 Customer support Number of customers F Other Not allocated to customers or products Based on an extensive analysis and surveys conducted with all employees, Boxes distributes its overhead to the cost pools as follows: Customer Assembly Setups Machining Support Other Total Manufacturing overhead Selling overhead 50% 15% 20% 10% 5% 100% 5% 5% 10% 75% 5% 100% Administrative overhead 30% 20% 15% 20% 15% 100% 24 259 211 Administrative overhead Price and direct costs per unit for Blue boxes last year are as follows: 10% 15% 5% 30% 20% 15% 20% 15% 100% 100% 27 28 29 Selling price Direct material 30 Direct labour Blue $220.00 $40.00 $10.00 31 32 Chapter formulas 33 1. Activity rate = Total cost in cost pool/total activity level 34 2. Indirect costs applied to cost object = Activity rate x Activity level incurred by cost object 35 36 Required: 37 Part 1: Prepare a report showing first stage allocation of the overhead costs to the activity cost pools. (5 marks) 38 Customer 39 Assembly Setups Machining Support Other Total . Manufacturing overhead Selling overhead Administrative overhead Total overhead costs 46 47 481 49 50 51 52 53 Total overhead costs Part 2: Calculate the activity rates for each cost pool. (4 marks) Activity Cost Pool Assembly Setups Machining Customer Support Other 54 55 Part 3: During the past month, 2 customers purchased a total of 150 units of the Blue storage boxes. These orders required a total of 100 machine hours. Compute the customer margin using an income statement format. (6 marks) All rows may not be required. 56 57 58 59 0 1 Customer margin (loss)