Exercise 7-2 First Stage Allocation [LO7-2] SecuriCorp operates a fleet of armor

Question

Exercise 7-2 First Stage Allocation [LO7-2] 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: Driver and guard wages Vehicle operating expense Vehicle depreciation Customer representative salaries $ 980,000 410,000 290,000 320,000 and expenses Office expenses Administrative expenses 180,000 480,000 Total cost 2.660,000 The distribution of resource consumption across the activity cost pools is as follows: and Customer Driver and guard wages Vehicle operating expense Vehicle depreciation Customer epesentative salaries and Travel Delivery Service Other Totals 5% 100% 0% 25% 100% 60% 15% 0% 25% 100% 50% 70% 35% 10% 5% 0% 0% 90% 10% 100% 0% 0% 20% 5% 50% 35% Office expenses 30% 60% 100% 100% Required: Complete the first stage allocations of costs to activity cost pools. Driver and guard wages Vehicle depreciation Office expenses Administrative expenses Total cost

Explanation / Answer

Complete the first stage allocations of cost to activity cost pools :

Travel Pickup and delivery Customer service Other Total Driver and guard wages 490000 343000 98000 49000 980000 Vehicle operating expense 287000 20500 0 102500 410000 Vehicle depreciation 174000 43500 0 72500 290000 Customer representative salaries and expenses 0 0 288000 32000 320000 Office expenses 0 36000 54000 90000 180000 Administrative expenses 0 24000 288000 168000 480000 Total cost 951000 467000 728000 514000 2660000

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