ScholfieldEnterprises makes a variety of products that it sells to other busines

Question

ScholfieldEnterprises makes a variety of products that it sells to other businesses. The company’s activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below:

The cost of serving customers, $1,191.00 per customer, is the cost of serving a customer for one year.

Latif Corporation buys only one of the company’s products which ScholfieldEnterprises sells for $15.60per unit. Last year Latif Corporation ordered a total of 1,100units of this product in 2orders. To fill the orders, 7batches were required. The direct materials cost is $7.85per unit and the direct labor cost is $1.90per unit.Each unit requires 0.10DLHs.

According to the ABC system, the total cost of the activity "Processing batches" for this customer this past year was closest to:

Activity Cost Pool Activity Measure Activity Rate Supporting assembly Direct labor-hours (DLHs) $ 6.55 per DLH Processing batches Number of batches $ 138.20 per batch Processing orders Number of orders $ 52.60 per order Serving customers Number of customers $ 1,191.00 per customer

Explanation / Answer

Activity Cost Pool Activity Measure Activity Rate Supporting assembly Direct labor-hours (DLHs) 6.55 per DLH Processing batches Number of batches 138.20 per batch Processing orders Number of orders 52.60 per order Serving customers Number of customers 1,191.00 per customer Latif Corporation LY Data: Sales Price PU 15.60 Total Units Ordered 1100 No of Orders 2.00 No. of Batchs Required 7.00 Direct Material PU 7.85 Direct Labor PU 1.90 Direct Labor PU in Hours 0.10 Calculation for Determing Processing Batchs Cost for Latif for LY: Activity Cost Pool Activity Measure Activity Rate Processing batches Number of batches 138.20 per batch Latif Corporation LY Data: No. of Batchs Required 7.00 Cost for Processing: No of Batchs*Cost per Batch Cost for Processing: 7*138.20 Cost for Processing: 967.40

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