FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:---
**Activity-Based Costing and Activity Rates**
In this section, we will compute activity rates for various activity cost pools. Ensuring accurate calculation of these rates is essential for effective cost management and budgeting in businesses.
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### Activity Cost Pool and Rates
**Compute the activity rates for the activity cost pools.**
*Note: Round the "Supporting direct labor" to 2 decimal places.*
| Activity Cost Pool | Activity Rate |
|----------------------------|------------------------|
| Supporting direct labor | ______ per DLH |
| Order processing | ______ per order |
| Customer support | ______ per customer |
- **DLH** stands for Direct Labor Hours.
- The rates are calculated based on specific cost drivers, such as the number of orders or the number of customers, depending on the activity.
This table provides a framework to determine costs associated with different business processes, enabling more precise cost allocation and aiding in decision-making.
---
Transcribed Image Text:# Activity-Based Costing System of Advanced Products Corporation
Advanced Products Corporation utilizes an activity-based costing system and has detailed the following data:
### Overhead Costs
- **Wages and salaries:** $300,000
- **Other overhead costs:** $100,000
- **Total overhead costs:** $400,000
### Activity Cost Pool and Measures
- **Supporting Direct Labor:**
- Activity Measure: Number of direct labor-hours
- Total Activity: 20,000 DLHs (Direct Labor Hours)
- **Order Processing:**
- Activity Measure: Number of customer orders
- Total Activity: 400 orders
- **Customer Support:**
- Activity Measure: Number of customers
- Total Activity: 200 customers
- **Other:**
- Activity Type: Organization-sustaining activity
- Total Activity: Not applicable
### Distribution of Resource Consumption Across Activities
#### Wages and Salaries
- Supporting Direct Labor: 40%
- Order Processing: 30%
- Customer Support: 20%
- Other: 10%
#### Other Overhead Costs
- Supporting Direct Labor: 30%
- Order Processing: 10%
- Customer Support: 20%
- Other: 40%
### Shenzhen Enterprises Order
During the year, Advanced Products completed a specific order for Shenzhen Enterprises, which was the only order for this customer.
#### Data Concerning the Order
- **Units Ordered:** 10 units
- **Direct Labor-Hours:** 2 DLHs per unit
- **Selling Price:** $300 per unit
- **Direct Materials:** $100 per unit
- **Direct Labor:** $50 per unit
### Required Tasks
1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.
2. Compute the activity rates for the activity cost pools.
3. Calculate the total overhead costs for the order from Shenzhen Enterprises, including customer support costs.
4. Calculate the customer margin for Shenzhen Enterprises.
This information aims to assist in the analysis and improvement of cost management practices by offering insights into allocations and calculations within an advanced costing framework.
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