Activity-Based Budgeting (ABB) OFC Company of Kansas City prints business forms andother specialty paper products, such as writing paper, envelopes, note cards, and greeting cards. ItsBusiness Services division offers inventory management services and desktop delivery on request.The division uses an activity-based costing (ABC) system. The budgeted usage of each activity costdriver and cost-driver rates for January 2019 for the Business Services division are:Activity Cost Driver Budgeted Activity Cost-Driver RateStorage Cartons in inventory 400,000 $0.4925/carton/monthRequisition handling Requisitions 30,000 12.50Pick packing Lines 800,000 1.50Data entry Lines 800,000 0.80Requisitions 30,000 1.20Desktop delivery Per delivery 12,000 30.00For the month, the division expects to make 11,700 deliveries to deliver 1,170,000 cartons tocustomers.Required1. What is the total budgeted cost for each activity and for the Business Services division in January 2019?2. Assume, in contrast to requirement 1, that activity-related information was not available. Rather, theonly information available is that the budgeted fixed costs for the month are $1,000,000, and the budgeted variable cost per carton is estimated as $1.30. What is the budgeted total cost for the month usingthis single volume-based approach? Compare and comment on the difference in your answers to requirements 1 and 2.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Activity-Based Budgeting (ABB) OFC Company of Kansas City prints business forms and
other specialty paper products, such as writing paper, envelopes, note cards, and greeting cards. Its
Business Services division offers inventory management services and desktop delivery on request.
The division uses an activity-based costing (ABC) system. The budgeted usage of each activity cost
driver and cost-driver rates for January 2019 for the Business Services division are:
Activity Cost Driver Budgeted Activity Cost-Driver Rate
Storage Cartons in inventory 400,000 $0.4925/carton/month
Requisition handling Requisitions 30,000 12.50
Pick packing Lines 800,000 1.50
Data entry Lines 800,000 0.80
Requisitions 30,000 1.20
Desktop delivery Per delivery 12,000 30.00
For the month, the division expects to make 11,700 deliveries to deliver 1,170,000 cartons to
customers.
Required
1. What is the total budgeted cost for each activity and for the Business Services division in January 2019?
2. Assume, in contrast to requirement 1, that activity-related information was not available. Rather, the
only information available is that the budgeted fixed costs for the month are $1,000,000, and the budgeted variable cost per carton is estimated as $1.30. What is the budgeted total cost for the month using
this single volume-based approach? Compare and comment on the difference in your answers to requirements 1 and 2.

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