Alter's Home Center (AHC) sells renovation and remodeling products to both contractors and individual home owners. One of theservices AHC offers is delivery of the purchased products to the customer's work site. Because not all customers take advantage ofthe delivery service option, ACH adds 10 percent to the cost of the products purchased to cover the delivery cost. A business internspent the summer at ACH. The intern's assignment was to analyze the delivery service and recommend a better way to chargecustomers for using it. The intern, who had studied activity-based costing, identified the following activities and the data related tothem:ActivityPicking orderDelivering orderHandling complaintsTotal delivery costCost DriverNumber of itemsNumber of ordersNumber of complaintsAnnual Cost$ 308,125720,00040,000Annual Driver Volume362,500 items30,000 orders160 complaints$ 1,068,125The intern selected two customers, who were frequent customers, to use as an illustration of the system: Wagner Remodeling andBurlington Contractors. The intern collected the following information on these two customers for the most recent six months:Total order value (before delivery charge)Number of ordersTotal number of itemsNumber of delivery complaintsRequired:BurlingtonContractorsWagnerRemodeling$ 15,000$ 18,000205233031015a. What would the delivery charge for each customer be under the current policy of 10 percent of order value?b. What would the activity-based costing system estimate as the cost of delivering to each customer?Complete this question by entering your answers in the tabs below.Required A Required BWhat would the delivery charge for each customer be under the current policy of 10 percentof order value?Delivery ChargePer Customer

Activity-based costing is one of the methods that is used to make allocation of the overhead cost to…

Activity Picking order Delivering order Handling complaints. Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 308,125 720,000 40,000 $ 1,068,125 Annual Driver Volume 362,500 items 30,000 orders 160 complaints The intern selected two customers, who were frequent customers, to use as an illustration of the system: Wagner Remodeling and Burlington Contractors. The intern collected the following information on these two customers for the most recent six months: Number of orders Total number of items Total order value (before delivery charge) Number of delivery complaints Wagner Remodeling $ 15,000 20 330 1 Burlington Contractors $ 18,000 52 310 5 Required: a. What would the delivery charge for each customer be under the current policy of 10 percent of order value? b. What would the activity-based costing system estimate as the cost of delivering to each customer?

Activity Picking order Delivering order Handling complaints. Total delivery cost Cost Driver Number of items Number of orders Number of complaints Annual Cost $ 308,125 720,000 40,000 $ 1,068,125 Annual Driver Volume 362,500 items 30,000 orders 160 complaints The intern selected two customers, who were frequent customers, to use as an illustration of the system: Wagner Remodeling and Burlington Contractors. The intern collected the following information on these two customers for the most recent six months: Number of orders Total number of items Total order value (before delivery charge) Number of delivery complaints Wagner Remodeling $ 15,000 20 330 1 Burlington Contractors $ 18,000 52 310 5 Required: a. What would the delivery charge for each customer be under the current policy of 10 percent of order value? b. What would the activity-based costing system estimate as the cost of delivering to each customer?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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