Ferris Corporation makes a single product—a fire-resistant commercial filing cabinet—that it sells to office furniture distributors. The company has a simple ABC system that it uses for internal decision making. The company has two overhead departments whose costs are listed on the following page:

Manufacturing overhead .................................. $500,000

Selling and administrative overhead ................ 300,000

Total overhead costs ........................................ $800,000

The company’s ABC system has the following activity cost pools and activity measures:

Activity Cost Pool Activity Measure

Assembling units ..................... Number of units

Processing orders .................... Number of orders

Supporting customers ............. Number of customers

Other ........................................ Not applicable

Costs assigned to the “Other” activity cost pool have no activity measure; they consist of the costs of unused capacity and organization-sustaining costs—neither of which are assigned to orders, customers, or the product.

Ferris Corporation distributes the costs of manufacturing overhead and of selling and administrative

overhead to the activity cost pools based on employee interviews, the results of which are reported below:

Distribution of Resource Consumption Across Activity Cost Pools
	Assembling units	Processing Orders	Supporting Customers	Other	Total
Manufacturing overhead	50%	35%	5%	10%	100%
Selling and administrative	10%	45%	25%	20%	100%
Total activity	1,000 units	250 orders	100 customers

Required:

1- Perform the first-stage allocation of overhead costs to the activity cost pools and find manufacturing overhead for Assembling units.

2-Compute activity rates for the activity cost pools and find the activity rate for processing orders

3-Compute activity rates for the activity cost pools and find the activity rate for supporting customers

4-Office Mart is one of Ferris Corporation’s customers. Last year, Office Mart ordered filing cabinets four different times. Office Mart ordered a total of 80 filing cabinets during the year. What is the ABC cost for Assembeling unit?

5-Office Mart is one of Ferris Corporation’s customers. Last year, Office Mart ordered filing cabinets four different times. Office Mart ordered a total of 80 filing cabinets during the year. What is the ABC cost for Processing orders?

Answer rating: 100% (QA)

Answer Solution COST ALLOCATION Assembling Units Processing Units Supporting Custom... View the full answer