Advanced Products Corporation supplied the following data from its activity-based costing system: Overhead Costs Wages and salaries Other overhead costs Total overhead costs $ 300,000 100,000 $ 400,000
Advanced Products Corporation supplied the following data from its activity-based costing system: Overhead Costs Wages and salaries Other overhead costs Total overhead costs $ 300,000 100,000 $ 400,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Advanced Products Corporation supplied the following data from its activity-based costing system:
Overhead Costs
Wages and salaries
Other overhead costs
Total overhead costs
Activity Cost Pool
Supporting direct labor
order processing
Customer support
Other
Wages and salaries.
Other overhead costs.
$ 300,000
100,000
$ 400,000
Activity Measure
Number of direct labor-hours
Number of customer orders
Number of customers
Direct labor-hours
selling price
Direct materials
Direct labor
This is an organization-
sustaining activity
Labor
40%
30%
Distribution of Resource Consumption Across Activities
Supporting Direct Order
Customer
Support
20%
20%
Data Concerning the Shenzhen Enterprises Order
Units ordered
10 units.
2 DLHS per unit
Total Activity for the
Year
20,000 DLHS
Processing
30%
10%
$ 300 per unit
$ 180 per unit
$50 per unit
400 orders
280 customers
Not applicable
During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any
other products during the year. Data concerning that order follow:
Other
10%
40%
Total
100%
100%
Required:
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.
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Step 1: Explain the concept of Activity Based Costing:
VIEWStep 2: (1) Prepare a report showing the first-stage allocations of overhead costs to activity cost pools:
VIEWStep 3: (2) Compute the activity rates for the activity cost pools:
VIEWStep 4: (3) Calculate the total overhead costs for the order from Shenzhen Enterprises:
VIEWStep 5: (4) Calculate the customer margin for Shenzhen Enterprises:
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