Data

Manufacturing overhead $500,000

Selling and administrative overhead $300,000

Processing Supporting
Assembling Units Orders Customers

Manufacturing overhead 50% 35% 5%

Selling and administrative overhead 10% 45% 25%

Total activity 1,000 250 100
units orders customers

OfficeMart orders:
Customers 1 customer
Orders 4 orders

Number of filing cabinets ordered in total 80 units

Selling price $595
Direct materials $180
Direct labor $50

Enter a formula into each of the cells marked

with a ? below

Review Problem: Activity-Based Costing

Perform the first stage allocations

Processing Supporting
Assembling Units Orders Customers

Manufacturing overhead $ 250,000 $ 175,000 $ 25,000

Selling and administrative overhead 30,000 135,000 75,000
Total cost $ 280,000 $ 310,000 $ 100,000

Compute the activity rates

Activity Cost Pools Total Cost Total Activity

Assembling units $ 280,000 1,000 units

Processing orders $ 310,000 250 orders

Supporting customers $ 100,000 100 customers

Compute the overhead cost attributable to

the OfficeMart orders

Activity Cost Pools Activity Rate Activity

Assembling units $280 per unit 80

Processing orders $1,240 per order 4

Supporting customers $1,000 per customer 1

Determine the customer margin for the OfficeMart orders under Activity-Based Costing
Sales $ 47,600
Costs:
Direct materials $ 14,400
Direct labor 4,000

Unit-related overhead $22,400

Order-related overhead $4,960

Customer-related overhead $1,000 46,760

Customer margin $ 840

Determine the product margin for the OfficeMart orders under a traditional cost system

Manufacturing overhead $500,000

Total activity 1,000 units

Manufacturing overhead per unit $500 per unit

Sales $ 47,600
Costs:
Direct materials $ 14,400
Direct labor 4,000

Manufacturing overhead 40,000 58,400

Traditional costing product margin $ (10,800)

 Other

10%

20%

Other Total

$ 50,000 $ 500,000
60,000 300,000
$ 110,000 $ 800,000

Activity Rate
 $280 per unit

$1,240 per order

$1,000 per customer

Activity ABC Cost

units $22,400

orders $4,960

customer $1,000

ing

tem
Data

Manufacturing overhead $500,000

Selling and administrative overhead $300,000

Assembling Processing Supporting

Units Orders Customers Other
Manufacturing overhead 50% 35% 5% 10%
Selling and administrative overhead 10% 45% 25% 20%
Total activity 1,000 250 100
units orders customers

OfficeMart orders:
Customers 1 customer
Orders 4 orders
Number of filing cabinets ordered in total 160 units

Selling price $595

Direct materials $180

Direct labor $50

Enter a formula into each of the cells

marked with a ? below

Review Problem: Activity-Based Costing

Perform the first stage allocations

Assembling Processing Supporting
Units Orders Customers Other
Manufacturing overhead $ 250,000 $ 175,000 $ 25,000 $ 50,000
Selling and administrative overhead 30,000 135,000 75,000 60,000
Total cost $ 280,000 $ 310,000 $ 100,000 $ 110,000

Compute the activity rates

Activity Cost Pools Total Cost Total Activity Activity Rate
Assembling units $ 280,000 1,000 units $280
Processing orders $ 310,000 250 orders $1,240
Supporting customers $ 100,000 100 customers $1,000

Compute the overhead cost attributable

to the OfficeMart orders
Activity Cost Pools Activity Rate Activity
Assembling units $280 per unit 160 units
Processing orders $1,240 per order 4 orders
Supporting customers $1,000 per customer 1 customer

Determine the customer margin for the OfficeMart orders under Activity-Based Costing
Sales $ 95,200
Costs:
Direct materials $ 28,800
Direct labor 8,000
Unit-related overhead $44,800
Order-related overhead $4,960
Customer-related overhead $1,000 87,560
Customer margin $ 7,640

Determine the product margin for the OfficeMart orders under a traditional cost system
Manufacturing overhead $500,000
Total activity 1,000 units
Manufacturing overhead per unit $500 per unit

Sales $ 95,200
Costs:

Direct materials $ 28,800

Direct labor 8,000
Manufacturing overhead 80,000 116,800
Traditional costing product margin $ (21,600)
 Total
$ 500,000
300,000
$ 800,000

Activity Rate
per unit
per order
per customer

ABC Cost
$44,800
$4,960
$1,000
Data
Manufacturing overhead $500,000
Selling and administrative overhead $300,000

Supporting
Assembling Units Processing Orders Customers
Manufacturing overhead 50% 35% 5%
Selling and administrative overhead 10% 45% 25%
Total activity 1,000 250 100
units orders customers

OfficeMart orders:
Customers 1 customer
Orders 20 orders

Number of filing cabinets ordered in total 80 units

Selling price $795
Direct materials $185
Direct labor $90
Enter a formula into each of the cells
marked
Review with a ? below
Problem: Activity-Based
Costing

Perform the first stage allocations

Supporting
Assembling Units Processing Orders Customers
Manufacturing overhead $ 250,000 $ 175,000 $ 25,000
Selling and administrative overhead 30,000 135,000 75,000
Total cost $ 280,000 $ 310,000 $ 100,000

Compute the activity rates

Activity Cost Pools Total Cost Total Activity
Assembling units $ 280,000 1,000 units
Processing orders $ 310,000 250 orders
Supporting customers $ 100,000 100 customers

Compute the overhead cost

attributable to the OfficeMart orders
Activity Cost Pools Activity Rate Activity
Assembling units $280 per unit 80
Processing orders $1,240 per order 20
Supporting customers $1,000 per customer 1

Determine the customer margin for the OfficeMart orders under Activity-Based Costing
Sales $ 63,600
Costs:
Direct materials $ 14,800
Direct labor 7,200
Unit-related overhead $22,400
Order-related overhead $24,800
Customer-related overhead $1,000 70,200
Customer margin $ (6,600)

Determine the product margin for the OfficeMart orders under a traditional cost system
Manufacturing overhead $500,000
Total activity 1,000 units
Manufacturing overhead per unit $500 per unit

Sales $ 63,600
Costs:
Direct materials $ 14,800
Direct labor 7,200
Manufacturing overhead 40,000 62,000
Traditional costing product margin $ 1,600
 Other
10%
20%

Other Total
$ 50,000 $ 500,000
60,000 300,000
$ 110,000 $ 800,000

Activity Rate
$280 per unit
$1,240 per order
$1,000 per customer

Activity ABC Cost

units $22,400
orders $24,800
customer $1,000

sting
stem
Data
Manufacturing overhead $500,000
Selling and administrative overhead $300,000

Processing Supporting
Assembling Units Orders Customers
Manufacturing overhead 50% 35% 5%
Selling and administrative overhead 10% 30% 40%
Total activity 1,000 250 100
units orders customers

OfficeMart orders:
Customers 1 customer
Orders 20 orders
Number of filing cabinets ordered in total 80 units
Selling price $795
Direct materials $185
Direct labor $90

Enter a formula into each of the cells marked

with a ? below
Review Problem: Activity-Based Costing

Perform the first stage allocations

Processing Supporting
Assembling Units Orders Customers
Manufacturing overhead $ 250,000 $ 175,000 $ 25,000
Selling and administrative overhead 30,000 90,000 120,000
Total cost $ 280,000 $ 265,000 $ 145,000

Compute the activity rates

Activity Cost Pools Total Cost Total Activity
Assembling units $ 280,000 1,000 units
Processing orders $ 265,000 250 orders
Supporting customers $ 145,000 100 customers

Compute the overhead cost attributable to

the OfficeMart orders
Activity Cost Pools Activity Rate Activity
Assembling units $280 per unit 80
Processing orders $1,060 per order 20
Supporting customers $1,450 per customer 1
Determine the customer margin for the OfficeMart orders under Activity-Based Costing
Sales $ 63,600
Costs:
Direct materials $ 14,800
Direct labor 7,200
Unit-related overhead $22,400
Order-related overhead $21,200
Customer-related overhead $1,450 67,050
Customer margin $ (3,450)

Determine the product margin for the OfficeMart orders under a traditional cost system
Manufacturing overhead $500,000
Total activity 1,000 units
Manufacturing overhead per unit $500 per unit

Sales $ 63,600
Costs:
Direct materials $ 14,800
Direct labor 7,200
Manufacturing overhead 40,000 62,000
Traditional costing product margin $ 1,600
 Other
10%
20%

Other Total
$ 50,000 $ 500,000
60,000 300,000
$ 110,000 $ 800,000

Activity Rate
$280 per unit
$1,060 per order
$1,450 per customer

Activity ABC Cost

units $22,400
orders $21,200
customer $1,450
ting

tem