Suppose that GOPOKES Manufacturing has two classes of distributors: JIT distribu
ID: 2499646 • Letter: S
Question
Suppose that GOPOKES Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders; and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. GOPOKES Manufacturing provides the following information about customer-related activities and costs for the last quarter of 2008:
JIT Distributors
Non-JIT Distributors
Cost Drivers:
Sales Orders
200
20
Sales Calls
150
150
Service Calls
900
100
Average order size
50
500
Manufacturing cost/unit
$100
$100
Customer Costs:
Processing sales orders
$880,000
Selling goods
$320,000
Servicing goods
$300,000
Total
$1,500,000
Unit selling price is cost plus 100 percent (equals $200).
Using the listed cost drivers to allocate customer costs with Activity-Based Costing, how much customer cost would be allocated to the Non-JIT distributors (round to the nearest whole dollar)?
Suppose that GOPOKES Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders; and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. GOPOKES Manufacturing provides the following information about customer-related activities and costs for the last quarter of 2008:
JIT Distributors
Non-JIT Distributors
Cost Drivers:
Sales Orders
200
20
Sales Calls
150
150
Service Calls
900
100
Average order size
50
500
Manufacturing cost/unit
$100
$100
Customer Costs:
Processing sales orders
$880,000
Selling goods
$320,000
Servicing goods
$300,000
Total
$1,500,000
Unit selling price is cost plus 100 percent (equals $200).
Using the listed cost drivers to allocate customer costs with Activity-Based Costing, how much customer cost would be allocated to the Non-JIT distributors (round to the nearest whole dollar)?
Explanation / Answer
The customer cost allocated to the Non-JIT distributors is $512,727.
JIT Distributors ($) Non-JIT Distributors ($) Total costs ($) Customer cost: Processing sales orders ($880,000*200/220) ($880,000*20/220) 800000 80000 880,000 Selling goods ($320,000*150/300) ($320,000*150/300) 160000 160000 320,000 Servicing goods ($300,000*50/550) ($300,000*500/550) 150000 272727 300,000 Total costs allocated as per activity based costing 1,110,000 512,727 1500000Related Questions
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