Exercise $10-31($Algo$)$ Activity$-$Based Costing of Customers $($LO $10-3,4)$

Rupert$$s Appliance Warehouse $($RAW$)$ delivers appliances to retailers throughout the city. The firm adds $6$ percent to the cost of the appliances to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. The finance team at RAW has analyzed the delivery service using activity$-$based costing methods and identified four activities. Data on these activities follow:

Activity Cost Driver Activity Cost Cost Driver Volume

Processing order Number of orders $ $104,0008,000$ orders

Loading truck Number of items $180,000120,000$ items

Delivering order Number of orders $128,0008,000$ orders

Billing Number of invoices $112,0007,000$ invoices

Total overhead $ $524,000$

Two of Rupert's customers are McLean Designs and Neveux Appliances. Data for orders and deliveries to these two customers follow:

McLean Designs Neveux Appliances

Order value $($total$)$ $ $81,000$ $ $91,000$

Number of orders $61186$

Total number of items $6501,100$

Number of invoices $15130$

Required:

What would the delivery charge for each customer be under the current policy of $6$ percent of order value?

What would the activity$-$based costing system estimate as the cost of delivering to each customer?