upert’s Appliance Warehouse (RAW) delivers appliances to retailers throughout the city. The firm adds 6 percent to the cost of the appliances to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. The finance team at RAW has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow: Activity Cost Driver Activity Cost Cost Driver Volume Processing order Number of orders $ 70,000 5,000 orders Loading truck Number of items 105,000 75,000 items Delivering order Number of orders 85,000 5,000 orders Billing Number of invoices 68,000 4,000 invoices Total overhead $ 328,000 Two of Rupert's customers are McLean Designs and Neveux Appliances. Data for orders and deliveries to these two customers follow: McLean Designs Neveux Appliances Order value (total) $ 72,000 $ 82,000 Number of orders 52 96 Total number of items 510 1,200 Number of invoices 12 90 Required: What would the delivery charge for each customer be under the current policy of 6 percent of order value? What would the activity-based costing system estimate as the cost of delivering to each customer? What would the delivery charge for each customer be under the current policy of 6 percent of order value? Delivery Charge Per Customer McLean Designs Neveux Appliances What would the activity-based costing system estimate as the cost of delivering to each customer? McLean Designs Neveux Appliances Processing order Loading truck Delivering order Billing Total cost
upert’s Appliance Warehouse (RAW) delivers appliances to retailers throughout the city. The firm adds 6 percent to the cost of the appliances to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. The finance team at RAW has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow: Activity Cost Driver Activity Cost Cost Driver Volume Processing order Number of orders $ 70,000 5,000 orders Loading truck Number of items 105,000 75,000 items Delivering order Number of orders 85,000 5,000 orders Billing Number of invoices 68,000 4,000 invoices Total overhead $ 328,000 Two of Rupert's customers are McLean Designs and Neveux Appliances. Data for orders and deliveries to these two customers follow: McLean Designs Neveux Appliances Order value (total) $ 72,000 $ 82,000 Number of orders 52 96 Total number of items 510 1,200 Number of invoices 12 90 Required: What would the delivery charge for each customer be under the current policy of 6 percent of order value? What would the activity-based costing system estimate as the cost of delivering to each customer? What would the delivery charge for each customer be under the current policy of 6 percent of order value? Delivery Charge Per Customer McLean Designs Neveux Appliances What would the activity-based costing system estimate as the cost of delivering to each customer? McLean Designs Neveux Appliances Processing order Loading truck Delivering order Billing Total cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Rupert’s Appliance Warehouse (RAW) delivers appliances to retailers throughout the city. The firm adds 6 percent to the cost of the appliances to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. The finance team at RAW has analyzed the delivery service using activity-based costing methods and identified four activities. Data on these activities follow:
| Activity | Cost Driver | Activity Cost | Cost Driver Volume | |
|---|---|---|---|---|
| Processing order | Number of orders | $ 70,000 | 5,000 | orders |
| Loading truck | Number of items | 105,000 | 75,000 | items |
| Delivering order | Number of orders | 85,000 | 5,000 | orders |
| Billing | Number of invoices | 68,000 | 4,000 | invoices |
| Total |
$ 328,000 |
Two of Rupert's customers are McLean Designs and Neveux Appliances. Data for orders and deliveries to these two customers follow:
| McLean Designs | Neveux Appliances | |
|---|---|---|
| Order value (total) | $ 72,000 | $ 82,000 |
| Number of orders | 52 | 96 |
| Total number of items | 510 | 1,200 |
| Number of invoices | 12 | 90 |
Required:
- What would the delivery charge for each customer be under the current policy of 6 percent of order value?
- What would the activity-based costing system estimate as the cost of delivering to each customer?
What would the delivery charge for each customer be under the current policy of 6 percent of order value?
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What would the activity-based costing system estimate as the cost of delivering to each customer?
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