Activity-Based Customer Costing Dormirbien Company produces mattresses for 20 re

Question

Activity-Based Customer Costing Dormirbien Company produces mattresses for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60% of the mattresses produced. The 19 smaller customers purchase mattresses in approximately equal quantities, where the orders are about the same size. Data concerning Dormirbien's customer activity are as follows:

Required:

Assign costs to customers by using an ABC approach. Round activity rates to at least three decimals and round activity costs to the nearest dollar.

Order filling rate $ per order Selling call rate $ per sales call Cost assignment: Large retailer $ Smaller retailers Large RetailerSmaller Retailers Units purchased Orders placed Number of sales calls Manufacturing costs Order filling costs allocated* Sales force costs allocated* 36,000 12 6 $14,400,000 $484,800 $240,000 24,000 1,200 294 $9,600,000 $323,200 160,000 Currently allocated on sales volume (units sold) Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver.

Explanation / Answer

Calculate activity rate and activity cost

Overhead Overhead cost cost driver expected activity activity rate Large retailer Smaller retailers Order filling 808000 No of order 1212 $666.667 per order 8000 800000 Selling call 400000 No of sales call 300 $1333.333 per sales call 8000 392000 Cost assigned 16000 1192000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.