Activity-Based Customer Costing Sleepeze 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 Sleepeze's customer activity are as follows: Large Retailer Smaller Retailers Units purchased 108,000 72,000 Orders placed Number of sales calls 36 3,600 18 882 Manufacturing costs $43,200,000 $28,800,000 Order filling costs allocated* $1,418,040 $945,360 Sales force costs allocated* $756,000 $504,000 *Currently allocated on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver. Required: Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar. Order filling rate Selling call rate Cost assignment: Large retailer Smaller retailers per order 1,400 per sales call

Activity-Based Customer Costing Sleepeze 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 Sleepeze's customer activity are as follows: Large Retailer Smaller Retailers Units purchased 108,000 72,000 Orders placed Number of sales calls 36 3,600 18 882 Manufacturing costs $43,200,000 $28,800,000 Order filling costs allocated* $1,418,040 $945,360 Sales force costs allocated* $756,000 $504,000 *Currently allocated on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver. Required: Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the nearest dollar. Order filling rate Selling call rate Cost assignment: Large retailer Smaller retailers per order 1,400 per sales call

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 2CE: Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each...

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Activity-Based Customer Costing Sleepeze 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 Sleepeze’s customer activity are as follows: Large Retailer Smaller Retailers Units purchased 108,000 72,000 Orders placed 36 3,600 Number of sales calls 18 882 Manufacturing costs $43,200,000 $28,800,000 Order filling costs allocated* $1,308,960 $872,640 Sales force costs allocated* $729,000 $486,000 *Currently allocated on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver. Required: Assign costs to customers by using an ABC approach. Round your answers and all intermediate…
Activity-Based Customer Costing Sleepeze 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 Sleepeze’s customer activity are as follows: Large Retailer Smaller Retailers Units purchased 108,000 72,000 Orders placed 36 3,600 Number of sales calls 18 882 Manufacturing costs $43,200,000 $28,800,000 Order filling costs allocated* $1,690,740 $1,127,160 Sales force costs allocated* $864,000 $576,000 *Currently allocated on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver. Required: Assign costs to customers by using an ABC approach. Round your answers and all intermediate…
Activity-Based Customer Costing Sleepeze 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 Sleepeze's customer activity are as follows: Large Retailer Smaller Retailers Units purchased 108,000 72,000 Orders placed 36 3,600 Number of sales calls 18 882 Manufacturing costs $43,200,000 $28,800,000 Order filling costs allocated* $1,455,127 $970,085 Sales force costs allocated* $719,820 $479,880 *Currently allocated on sales volume (units sold). Currently, customer-driven costs are assigned to customers based on units sold, a unit-level driver. Assign costs to customers by using an ABC approach. Round your answers and all intermediate calculations to the…
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Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Cost Driver Quantity of Cost Driver Cost per Unit of Cost Driver Purchasing Number of purchase orders 1,060 $156 per order Warehousing Number of moves 8,600 $36 per move Distributing Number of shipments 560 $86 per shipment Caldwell buys 100,600 units at an average unit cost of $16 and sells them at an average unit price of $26. The firm also has fixed operating costs of $250,600 for the year. Caldwell’s customers are demanding a 16% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell’s suppliers, however, are willing to give only a 10% discount. Required:Caldwell has estimated that it can reduce the number of purchase orders to 740 and can…
Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Driver $162 per order Activity Purchasing Warehousing Distributing Cost Driver Quantity of Cost Driver Cost per Unit of Cost Number of purchase orders 1,120 Number of moves 8,100 620 Number of shipments 31 per move 92 per shipment Caldwell buys 101,200 units at an average unit cost of $11 and sells them at an average unit price of $21. The firm also has fixed operating costs of $251,200 for the year. Caldwell's customers are demanding a 11% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 3% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 800 and can decrease the cost of each shipment by $15 with minor…
Lucky Clothing creates and sells t-shirts that can be customized. The cost of sales order processing and shipping is calculated using activity-based costing at Lucky Clothing. The sales order processing activity has a $9 per sales order activity rate, and the shipping activity has a $18 per shipment activity rate. Lucky Clothing sold a total of 25,300 personalized t-shirts, including 4,000 orders and 1,300 shipping. The total activity cost is calculated through: Sales order activity costs = Number of orders * sales order activity rate = 4000*9 = $36,000Shipping Activity costs = Number of shipping * Shipping Activity rate= 1300*18 = $23400Total activity costs = Sales order activity costs + Shipping Activity costsWhile the per-unit sales order processing and shipping activity cost for customizable t-shirts is solved as follows:Per unit sales order processing costs = Sales order processing costs/ Number of t shirts = $36000 + $23400 = $59400 Per unit sales order processing costs = Sales…
The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: Annual demand for denim cloth 40,700 yards Ordering cost per purchase order $185 Carrying cost per year 10% of purchase costs Safety-stock requirements = None Cost of denim cloth $11 per yard The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week). Q. Calculate the EOQ for denim cloth.
The Fabric World sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Fabric World has collected the following information: Annual demand for denim cloth 40,700 yards Ordering cost per purchase order $185 Carrying cost per year 10% of purchase costs Safety-stock requirements = None Cost of denim cloth $11 per yard The purchasing lead time is 2 weeks. The Fabric World is open 220 days a year (44 weeks for 5 days a week). Q. Calculate the number of orders that will be placed each year.
Crane Decor sells home decor items through three distribution channels-retail stores, the Internet, and catalog sales. Each distribution channel is evaluated as an investment center. Selected results from the latest year are as follows: Retail Stores Internet Catalog Sales Sales revenue $10,130,000 $4,080,000 $3,400,000 Variable expenses 4,080,000 1,630,000 1,930,000 Direct fixed expenses 4,580,000 1.130.000 1,330,000 Average assets 8,080,000 4,080,000 1,600,000 Required rate of return 10% 10% 10% (a) Your answer is incorrect. Calculate the current residual income for each distribution channel. (If the residual income is a loss then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).) Residual Income $ Retail $ Online $ Catalog
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Orman Company produces neon-colored covers for tablets (e.g., iPads). For last year, Orman reported the following: Last year, Orman produced 89,000 units and sold 90,500 units at 10.50 per unit. Required: 1. Prepare a statement of cost of goods manufactured. 2. Prepare an absorption-costing income statement.