Comprehensive Activity-Based Costing Exercise

Advanced Products Corporation has supplied the following data from its activity-based costing system:

Overhead Costs
Wages and salaries	$300,000
Other Overhead costs	100,000
Total Overhead costs	$400,000

Activity Cost Pool	Activity Measure	Total Activity for the Year
Supporting direct labor	# of direct-labor hours	20,000 DLHs
Order processing	# of customer orders	400 orders
Customer support	# of customers	200 customers
Other	This is an organization-sustaining activity	Not applicable

Distribution of Resource Consumption Across Activities

	Supporting Direct Labor	Order Processing	Customer Support	Other	Total
Wages and salaries	40%	30%	20%	10%	100%
Other overhead costs	30%	10%	20%	40%	100%

During the year, Advanced Products completed one order for a new customer, Shenzen Enterprises. This customer did not order any other products during the year. Data concerning that order follow:

Units ordered	10 units
Direct labor-hours	2 DLHs per unit
Selling price	$300 per unit
Direct materials	$180 per unit
Direct labor	$50 per unit

Required: Use the template provided, save it to your desktop and then upload and submit your assignment.

1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. Prepare a report showing the overhead costs for the order from Shenzhen Enterprises including customer support costs.

4. Prepare a report showing the customer margin for Shenzhen Enterprises.

1. First-stage allocations of overhead costs to the activity cost pools:

	Supporting Direct Labor	Order Processing	Customer Support	Other	Total
Wages and salaries
Other overhead costs
Total Cost

2. Computation of activity rates:

Activity cost pools Total Cost Total Activity Activity Rate

3. Computation of the overhead costs for the Shenzhen Enterprises order:

Activity cost pools Activity Rate Activity ABC Cost

4. The customer margin for Shenzhen Enterprises is computed as follows: