Costs Cost driver Small retailer Medium retailer Ordering 300,000 Number of orders 8,000 4,000 Delivery 750,000 Number of deliveries 10,800 4,200 Customer Service 1,200,000 Number of products sold 320,000 480,000 Total overhead 2,250,000 What is the average total overhead cost per product sold to small retailers? (Assuming every item sold requires certain involvement of customer service) Choose the below answer.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Company MN is a wholesale distributor. It uses an ABC system to analyze customer profitability for its small- and medium-sized retail customers. The cost pool, cost driver and other relevant information is shown below.
Cost pool |
Costs |
Cost driver |
Small retailer |
Medium retailer |
---|---|---|---|---|
Ordering |
300,000 |
Number of orders |
8,000 |
4,000 |
Delivery |
750,000 |
Number of deliveries |
10,800 |
4,200 |
Customer Service |
1,200,000 |
Number of products sold |
320,000 |
480,000 |
Total overhead |
2,250,000 |
|
|
|
What is the
A. $3.81
B. $1.50
C. $25.00
D. $50.00
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![Essentials of Business Analytics (MindTap Course …](https://www.bartleby.com/isbn_cover_images/9781305627734/9781305627734_smallCoverImage.gif)
![Essentials of Business Analytics (MindTap Course …](https://www.bartleby.com/isbn_cover_images/9781305627734/9781305627734_smallCoverImage.gif)