$ 720,000 Driver and guard wages Vehicle operating expense . Vehicle depreciation .... 280,000 120,000 Customer representative salaries and expenses Office expenses.... Administrative expenses 160,000 30,000 320,000 Total cost .... $1,630,000 The distribution of resource consumption across the activity cost pools is as follows: Pickup and Customer Travel Delivery Service Other Totals Driver and guard wages 50% 35% 10% 5% 100% .... Vehicle operating expense . 70% 5% 0% 25% 100% Vehicle depreciation .. 60% 15% 0% 25% 100% Customer representative salaries and expenses 0% 0% 90% 10% 100% Office expenses 0% 20% 30% 50% 100% Administrative expenses 0% 5% 60% 35% 100% EXHIBIT 7-6 First-Stage Allocations to Activity Cost Pools A F H 1 Activity Cost Pools Customer Product Customer Orders Design Order Size Relations Other Totals 3 4 Production Department Indirect factory wages 6. $ 125,000 S 200,000 S 100 000 S 50.000 $ 25,000 S 180.000 60,000 500,000 60.000 Factory equipment depreciation Factory utilities Factory building lease 60,000 48,000 300,000 12,000 120,000 80,000 80,000 10 General Administrative Department: Administrative wages and salaries Office equipment depreciation Administrative building lease 60,000 15.000 160,000 22,500 11 20.000 40,000 120,000 400.000 50.000 60.000 12 12,500 13 14 15 Marketing Department 16 60.000 65.000 5.000 20 000 Marketing wages and salaries 17 150.000 35 000 25,000 10.000 250,000 Selling expenses 18 50.000 $ 320 000 S 252.000 S 380.000 S367 500 S 490 500 S 1810 000 19 Total 20 4 Exhibit 7-5 Exhibit 7-6 Exhibit 7-7 Exhibit 7-9 Exhibit 7-10 Exhibit 7-11 Exhibit 7-11 (2) I Exhibit 7-5 shows that Customer Orders consume 25% of the resources represented by the $500,000 of indirected factory wages. 25% x $500,000 = $125,000 Other entries in the table are computed in a similar fashion.

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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Question

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures
are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be
assigned using the activity-based costing system:

Required:
Complete the first stage allocations of costs to activity cost pools as illustrated in Exhibit 7–6.

$ 720,000
Driver and guard wages
Vehicle operating expense .
Vehicle depreciation ....
280,000
120,000
Customer representative salaries and expenses
Office expenses....
Administrative expenses
160,000
30,000
320,000
Total cost ....
$1,630,000
The distribution of resource consumption across the activity cost pools is as follows:
Pickup
and
Customer
Travel
Delivery
Service
Other
Totals
Driver and guard wages
50%
35%
10%
5%
100%
....
Vehicle operating expense .
70%
5%
0%
25%
100%
Vehicle depreciation ..
60%
15%
0%
25%
100%
Customer representative salaries
and expenses
0%
0%
90%
10%
100%
Office expenses
0%
20%
30%
50%
100%
Administrative expenses
0%
5%
60%
35%
100%

EXHIBIT 7-6
First-Stage Allocations to Activity
Cost Pools
A
F
H
1
Activity Cost Pools
Customer
Product
Customer
Orders
Design
Order Size Relations
Other
Totals
3
4 Production Department
Indirect factory wages
6.
$ 125,000 S 200,000 S 100 000 S 50.000 $ 25,000 S
180.000
60,000
500,000
60.000
Factory equipment depreciation
Factory utilities
Factory building lease
60,000
48,000
300,000
12,000
120,000
80,000
80,000
10 General Administrative Department:
Administrative wages and salaries
Office equipment depreciation
Administrative building lease
60,000
15.000
160,000
22,500
11
20.000
40,000
120,000
400.000
50.000
60.000
12
12,500
13
14
15 Marketing Department
16
60.000
65.000
5.000
20 000
Marketing wages and salaries
17
150.000
35 000
25,000
10.000
250,000
Selling expenses
18
50.000
$ 320 000 S 252.000 S 380.000 S367 500 S 490 500 S 1810 000
19 Total
20
4 Exhibit 7-5
Exhibit 7-6
Exhibit 7-7
Exhibit 7-9
Exhibit 7-10
Exhibit 7-11
Exhibit 7-11 (2) I
Exhibit 7-5 shows that Customer Orders consume 25% of the
resources represented by the $500,000 of indirected factory wages.
25% x $500,000 = $125,000
Other entries in the table are computed in a similar fashion.

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