upert’s Appliance Warehouse (RAW) delivers appliances to retailers throughout the city. The firm adds 6 percent to the cost of the appliances to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. The finance team at RAW has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow: Activity Cost Driver Activity Cost Cost Driver Volume Processing order Number of orders $ 70,000 5,000 orders Loading truck Number of items 105,000 75,000 items Delivering order Number of orders 85,000 5,000 orders Billing Number of invoices 68,000 4,000 invoices Total overhead $ 328,000 Two of Rupert's customers are McLean Designs and Neveux Appliances. Data for orders and deliveries to these two customers follow: McLean Designs Neveux Appliances Order value (total) $ 72,000 $ 82,000 Number of orders 52 96 Total number of items 510 1,200 Number of invoices 12 90 Required: What would the delivery charge for each customer be under the current policy of 6 percent of order value? What would the activity-based costing system estimate as the cost of delivering to each customer? What would the delivery charge for each customer be under the current policy of 6 percent of order value? Delivery Charge Per Customer McLean Designs Neveux Appliances What would the activity-based costing system estimate as the cost of delivering to each customer? McLean Designs Neveux Appliances Processing order Loading truck Delivering order Billing Total cost

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 4BE: Activity-based costing: selling and administrative expenses Jungle Junior Company manufactures and...

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Rupert’s Appliance Warehouse (RAW) delivers appliances to retailers throughout the city. The firm adds 6 percent to the cost of the appliances to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. The finance team at RAW has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow:

Activity	Cost Driver	Activity Cost	Cost Driver Volume
Processing order	Number of orders	$ 70,000	5,000	orders
Loading truck	Number of items	105,000	75,000	items
Delivering order	Number of orders	85,000	5,000	orders
Billing	Number of invoices	68,000	4,000	invoices
Total overhead		$ 328,000

Two of Rupert's customers are McLean Designs and Neveux Appliances. Data for orders and deliveries to these two customers follow:

	McLean Designs	Neveux Appliances
Order value (total)	$ 72,000	$ 82,000
Number of orders	52	96
Total number of items	510	1,200
Number of invoices	12	90

Required:

What would the delivery charge for each customer be under the current policy of 6 percent of order value?
What would the activity-based costing system estimate as the cost of delivering to each customer?

What would the delivery charge for each customer be under the current policy of 6 percent of order value?

	Delivery Charge Per Customer
McLean Designs
Neveux Appliances

What would the activity-based costing system estimate as the cost of delivering to each customer?

	McLean Designs	Neveux Appliances
Processing order
Loading truck
Delivering order
Billing
Total cost

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