Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover he delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity. based costing methods and identified four activities. Data on these activities follow. Activity Processing order Loading truck Delivering merchandise Processing invoice Total overhead Cost Driver Number of orders Number of items Number of orders Number of invoices. Order value Number of orders Number of items Number of invoices. 53 800 13 Cost Driver Volume Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City Diner Le Chien Chaud $73,000 $83,000 150 1,900 190 Cost $ 90,000 180,000 108,000 90,000 $468,000 Driver Volume 6,000 orders 120,000 items 6,000 orders 5,000 invoices Required: . What would the delivery charge for each customer be under the current policy of 10 percent of order value? . Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of deliverin o each customer.
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.
Please help with the attached question
Activity based costing depends upon the actual consumption of activities by the various processes .This helps in allocating of costs according to the usage of various activities entered into by the organization . Thus is useful for the management of the company is making precious decisions.
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