Sharp Company produces and sells plastic liners used to refurbish bathroom showers. The plastic liners are typically purchased in batches. Order clerks at Sharp process customer orders, which customers place through the company’s website. The order clerks issue shipping orders to the warehouse and prepare the order invoice, which is transmitted to the accounts receivable group.

Sharp’s satisfaction guaranteed policy means that it will accept for credit any batches its customers wish to return. The return clerks process product returns from customers. This involves updating the inventory account for the items returned and issuing a request to the accounts receivable group either to credit the account receivable if the invoice has not been paid or to issue a reimbursement. 

Because of the product size, all customers are local and the delivery group operates the trucks that deliver the orders to the customers. The delivery group also picks up any batches that customers wish to return. 

Information on the order clerk, return clerk, and delivery staff appears below.  

The following exhibit provides details on the average time for each activity:

Customer-related activities for the most recent period appear below.  

Required 

(a) What is the cost per hour of the order clerks, return clerks, and delivery staff? 

(b) What is the total activity cost (ordering, returning, and delivery) for each customer?

Transcribed Image Text:

Total cost per period. Hours worked per period ORDER CLERKS $49,000 1,750 RETURN CLERKS $70,000 1,750 DELIVERY $500,000 5,000