Assume a service company has implemented an activity-based costing system with five activities as shown below:Activity Cost Pool (Activity Measure)Total CostTotal Activity$ 400,000$ 280,000$ 150,000$ 450,000$ 300,000Customer deliveries (Number of deliveries)Manual order processing (Number of manual orders)8,000 deliveries5,000 manual ordersElectronic order processing (Number of electronic orders)15,000 electronic ordersLine item picking (Number of line items picked)Other organization-sustaining costs (None)375,000 line itemsThe company serves numerous customers, two of which include Hospital A and Hospital B. The activity demands pertaining to these two customersare as follows:ActivityActivity MeasureHospital AHospital BNumber of deliveries1225Number of manual orders30Number of electronic orders15Number of line items picked130250How much total activity cost should be assigned to Hospital A for internal management purposes?

Solution: Activities Overhead costs Estimated activity Activity Rate Customer deliveries…

ity Cost Pool (Activity Measure) Total Cost Total $ 400,000 $ 280,000 $ 150,000 $ 450,000 $ 300,000 mer deliveries (Number of deliveries) 1 order processing (Number of manual orders) 8,000 de 5,000 ma ronic order processing (Number of electronic orders) item picking (Number of line items picked) 15,000 el 375,000 li organization-sustaining costs (None) pany serves numerous customers, two of which include Hospital A and Hospital B. The activity demands pertaining t lows: Activity ity Measure r of deliveries r of manual orders r of electronic orders r of line items picked Hospital A Hospital B 12 25 30 15 130 250

ity Cost Pool (Activity Measure) Total Cost Total $ 400,000 $ 280,000 $ 150,000 $ 450,000 $ 300,000 mer deliveries (Number of deliveries) 1 order processing (Number of manual orders) 8,000 de 5,000 ma ronic order processing (Number of electronic orders) item picking (Number of line items picked) 15,000 el 375,000 li organization-sustaining costs (None) pany serves numerous customers, two of which include Hospital A and Hospital B. The activity demands pertaining t lows: Activity ity Measure r of deliveries r of manual orders r of electronic orders r of line items picked Hospital A Hospital B 12 25 30 15 130 250

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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