Exercise 7-15 (Static) Comprehensive Activity-Based Costing Exercise [LO7-2, LO7-3, LO7-4, LO7-5]

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

Overhead CostsWages and salaries$ 300,000Other overhead costs100,000Total overhead costs$ 400,000

Activity Cost PoolActivity MeasureTotal Activity for the YearSupporting direct laborNumber of direct labor-hours20,000DLHs Order processingNumber of customer orders400orders Customer supportNumber of customers200customers OtherThis is an organization- sustaining activityNot applicable

Distribution of Resource Consumption Across Activities Supporting Direct LaborOrder ProcessingCustomer SupportOtherTotal Wages and salaries40%30%20%10%100% Other overhead costs30%10%20%40%100%

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

Data Concerning the Shenzhen Enterprises OrderUnits ordered10unitsDirect labor-hours2DLHs per unitSelling price$ 300per unitDirect materials$ 180per unitDirect labor$ 50per unit

Required:

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. Calculate the total overhead costs for the order from Shenzhen Enterprises including customer support costs.

4. Calculate the customer margin for Shenzhen Enterprises.