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Kramer Office Supplies offers a number of different products to its customers. It currently allocates its ordering and delivery costs to its residential and business customer groups on the basis of order value. However, the company has recently decided to implement activity-based costing starting in 2022 to assign these costs to customers. Key data for 2021 are as follows: Activity Volume Activity Volume Residential $ 3,640,000 $ 3,000,000 5,950 2,380 102 Total Activity Cost Activity Volume $ 6,640,000 7,600 6,200 490 Activity Base Business Sales (order value) Order processing Generating sales Sales follow-up Processing change orders Delivery Activity No. of orders No. of sales calls No. of follow-ups No. of change orders No. of deliveries 2$ 955,000 752,000 816,000 62,000 1,400,992 $ 3,985,992 1,650 3,820 388 196 194 390 5,970 3,630 9,600 Total Kramer has 1,900 residential customers and 490 business customers. Required: 1. Compute the cost per customer for residential and business customers for 2021, using the current system of cost allocation. (Do not round intermediate calculations. Round "Cost per customer" to 2 decimal places and the rest to the nearest whole dollar amount.)

Kramer Office Supplies offers a number of different products to its customers. It currently allocates its ordering and delivery costs to its residential and business customer groups on the basis of order value. However, the company has recently decided to implement activity-based costing starting in 2022 to assign these costs to customers. Key data for 2021 are as follows: Activity Volume Activity Volume Residential $ 3,640,000 $ 3,000,000 5,950 2,380 102 Total Activity Cost Activity Volume $ 6,640,000 7,600 6,200 490 Activity Base Business Sales (order value) Order processing Generating sales Sales follow-up Processing change orders Delivery Activity No. of orders No. of sales calls No. of follow-ups No. of change orders No. of deliveries 2$ 955,000 752,000 816,000 62,000 1,400,992 $ 3,985,992 1,650 3,820 388 196 194 390 5,970 3,630 9,600 Total Kramer has 1,900 residential customers and 490 business customers. Required: 1. Compute the cost per customer for residential and business customers for 2021, using the current system of cost allocation. (Do not round intermediate calculations. Round "Cost per customer" to 2 decimal places and the rest to the nearest whole dollar amount.)

FINANCIAL ACCOUNTING
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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2. Assume that the 2021 data will hold for 2022. Compute the cost per customer for residential and business customers for 2022 using the proposed system of cost allocation. In doing so, calculate the overhead allocation rate for each activity, and use these rates to assign costs to the two customer groups. (Round your intermediate calculations and final answers to 2 decimal places.) Activity Cost Pool Activity Rate Order processing per order Getting sales per sales call Sales follow-up per follow-up Processing change orders Delivery per change order per delivery Residential Business Ordering and delivery costs applied Number of customers Cost per customer
Transcribed Image Text:2. Assume that the 2021 data will hold for 2022. Compute the cost per customer for residential and business customers for 2022 using the proposed system of cost allocation. In doing so, calculate the overhead allocation rate for each activity, and use these rates to assign costs to the two customer groups. (Round your intermediate calculations and final answers to 2 decimal places.) Activity Cost Pool Activity Rate Order processing per order Getting sales per sales call Sales follow-up per follow-up Processing change orders Delivery per change order per delivery Residential Business Ordering and delivery costs applied Number of customers Cost per customer
Kramer Office Supplies offers a number of different products to its customers. It currently allocates its ordering and delivery costs to its residential and business customer groups on the basis of order value. However, the company has recently decided to implement activity-based costing starting in 2022 to assign these costs to customers. Key data for 2021 are as follows: Activity Volume Activity Volume Total Activity Cost Activity Volume $ 6,640,000 7,600 6,200 490 Activity Activity Base Business $ 3,000,000 1,650 3,820 Residential $ 3,640,000 Sales (order value) Order processing Generating sales Sales follow-up Processing change orders Delivery Total $. 752,000 816,000 62,000 955,000 No. of orders No. of sales calls No. of follow-ups No. of change orders No. of deliveries 5,950 2,380 102 388 196 194 390 3,630 9,600 1,400,992 $ 3,985,992 5,970 Kramer has 1,900 residential customers and 490 business customers. Required: 1. Compute the cost per customer for residential and business customers for 2021, using the current system of cost allocation. (Do not round intermediate calculations. Round "Cost per customer" to 2 decimal places and the rest to the nearest whole dollar amount.) Residential Business Ordering and delivery costs applied Number of customers Cost per customer
Transcribed Image Text:Kramer Office Supplies offers a number of different products to its customers. It currently allocates its ordering and delivery costs to its residential and business customer groups on the basis of order value. However, the company has recently decided to implement activity-based costing starting in 2022 to assign these costs to customers. Key data for 2021 are as follows: Activity Volume Activity Volume Total Activity Cost Activity Volume $ 6,640,000 7,600 6,200 490 Activity Activity Base Business $ 3,000,000 1,650 3,820 Residential $ 3,640,000 Sales (order value) Order processing Generating sales Sales follow-up Processing change orders Delivery Total $. 752,000 816,000 62,000 955,000 No. of orders No. of sales calls No. of follow-ups No. of change orders No. of deliveries 5,950 2,380 102 388 196 194 390 3,630 9,600 1,400,992 $ 3,985,992 5,970 Kramer has 1,900 residential customers and 490 business customers. Required: 1. Compute the cost per customer for residential and business customers for 2021, using the current system of cost allocation. (Do not round intermediate calculations. Round "Cost per customer" to 2 decimal places and the rest to the nearest whole dollar amount.) Residential Business Ordering and delivery costs applied Number of customers Cost per customer
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