(a) What is the customer margin under activity-based costing when the number of
ID: 2392387 • Letter: #
Question
(a) What is the customer margin under activity-based costing when the number of orders increases to 14? (Enter a loss as a negative amount.)
(b) What is the product margin under the traditional costing system when the number of orders increases to 14? (Enter a loss as a negative amount.)
1 Chapter T: Excel 3 Data 4 Manufacturing overhead 5 Se ling and administrave overnead $500,000 5300,000 Assembling ProcessingSupporting Orders Units Customens Other 10% 50% 10% 25 9 Seling and administrative overhead 10 Total ctMity 100 12 13 OmceMart orders 14 Custormers 15 Orders 16 Number of tling cabinets ordered in total 17 Seling price 18 Drect materials 19 Direct labor 20 14 ordersS 90 units S595 5180 $50 (a) What is the customer margin under activity-based costing when the number of orders increases to 14 (Enter a loss as a negative amount.) (b) What is the product margin under the traditional costing system when the number or orders increases to 14 Enter a los$ as a negative amount.) n under the traditional (c) Which of the following statements are true? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.) If a customer orders more frequently but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease If a customer orders more frequently but orders the same total number of units over the course of a year, the praduct margin under a traditional costing system will decrease If a customer orders more frequently but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected If a custamer orders more frequently but orders the same total nunber of unils over the course of a year, the pradudt margin under a tradilional costing system will be unallectedExplanation / Answer
a) Firstly we need to allocate overhead to each activity which is shown as follows:-
Calculation of Activity Rates (Amounts in $)
Calculation of overhead costs attributable to officemart orders (Amts in $)
Calculation of customer margin for Officemart orders using ABC (Amounts in $)
b) Manufacturing Overhead per unit using Traditional = Total manufacturing Overhead/Total units
= $500,000/1,000 units = $500 per unit
Calculation of product margin under a traditional cost system (Amounts in $)
c) If customer orders more frequently then the number of orders will increase which increase the order related overhead cost under activity based costing. Therefore the customer margin under activity will decrease.
Particulars Assembling Units Processing Orders Supporting Customers Others Total Manufacturing overhead (50:35:5:10) 250,000 175,000 25,000 50,000 500,000 Selling and administrative overhead (10:45:25:20) 30,000 135,000 75,000 60,000 300,000 Total cost 280,000 310,000 100,000 110,000 800,000Related Questions
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