Exercise 7-2 (Algo) First Stage Allocation [LO7-2] 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: Driver and guard wages $ 960,000 Vehicle operating expense 390,000 Vehicle depreciation 270,000 Customer representative salaries and expenses 300,000 Office expenses 160,000 Administrative expenses 460,000 Total cost $ 2,540,000 The distribution of resource consumption across the activity cost pools is as follows: Travel Pickup and Delivery Customer 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% Required: Complete the first stage allocations of costs to activity cost pools.
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.
Exercise 7-2 (Algo) First Stage Allocation [LO7-2]
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:
| Driver and guard wages | $ 960,000 |
|---|---|
| Vehicle operating expense | 390,000 |
| Vehicle |
270,000 |
| Customer representative salaries and expenses | 300,000 |
| Office expenses | 160,000 |
| Administrative expenses | 460,000 |
| Total cost | $ 2,540,000 |
The distribution of resource consumption across the activity cost pools is as follows:
| Travel | Pickup and Delivery | Customer 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% |
Required:
Complete the first stage allocations of costs to activity cost pools.
![Exercise 7-2 (Algo) First Stage Allocation [LO7-2]
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:
Driver and guard wages
Vehicle operating expense
Vehicle depreciation
Customer representative salaries and
$ 960,000
390,000
270,000
expenses
Office expenses
Administrative expenses
300,000
160,000
460,000
$ 2,540,000
Total cost
The distribution of resource consumption across the activity cost pools is as follows:
TTTIT
Pickup and
Delivery
Customer
Travel
Service
Other
Totals
Driver and guard wages
Vehicle operating expense
Vehicle depreciation
Customer representative salaries and
50%
35%
10%
5%
100%
70%
5%
0%
25%
100%
60%
15%
0%
25%
100%
0%
0%
90%
10%
100%
expenses
Office expenses
Administrative expenses
0%
20%
30%
50%
100%
0%
5%
60%
35%
100%
Required:
Complete the first stage allocations of costs to activity cost pools.
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