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 $ 860,000 Vehicle operating expense 290,000 Vehicle depreciation 170,000 Customer representative salaries and expenses 200,000 Office expenses 60,000 Administrative expenses 360,000 Total cost $ 1,940,000 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.

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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Exercise 6-2 First Stage Allocation [LO6-2]

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	$	860,000
Vehicle operating expense		290,000
Vehicle depreciation		170,000
Customer representative salaries and expenses		200,000
Office expenses		60,000
Administrative expenses		360,000
Total cost	$	1,940,000

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.

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