1. SecuriCorp operates a fleet of armored cars that make scheduled pickups and d
ID: 2333386 • Letter: 1
Question
1. SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
The distribution of resource consumption across the activity cost pools is as follows:
Required:
Complete the first stage allocations of costs to activity cost pools.
2.
Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to customers, and the number of customers. In addition, the costs of maintaining garden beds depends on whether the beds are low maintenance beds (mainly ordinary trees and shrubs) or high maintenance beds (mainly flowers and exotic plants). Accordingly, the company uses the five activity cost pools listed below:
The company already has completed its first stage allocations of costs and has summarized its annual costs and activity as follows:
Required:
Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places except customer billing and service.)
3. Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates:
Activity data have been supplied for the following two products:
Total Expected Activity
Required:
How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system?
Driver and guard wages $ 720,000 Vehicle operating expense 280,000 Vehicle depreciation 120,000 Customer representative salaries and expenses 160,000 Office expenses 30,000 Administrative expenses 320,000 Total cost $ 1,630,000Explanation / Answer
STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF TOTAL Travel Pickup Customer Serv. Others APPORTION IN $ IN $ IN $ IN $ IN $ Driver and Guard Wages 50:35:10:5 720,000 360,000 252,000 72,000 36,000 Vehicle operating expense 70:5:0:25 280,000 196,000 14,000 0 70,000 Vehicle depreciation 60:15:0:25 120,000 72,000 18,000 0 30,000 Customer Rep salaries 0:0:90:10 160,000 0 0 144,000 16,000 office expenses 0:20:30:50 30,000 0 6,000 9,000 15,000 Admin expense 0:5:60:35 320,000 0 16,000 192,000 112000 TOTAL COST OF ACTIVITY 1,630,000 628,000 306,000 417,000 279,000
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