Chapter 7, Problem 3AE

The Excel worksheet form that appears below is to be used to recreate the Renew Problem pertaining to Ferris Corporation. Download the workbook containing this form from Connect, where you will also receive instructions about how to use this worksheet form.

You should proceed to the requirements below only after completing your worksheet.

Required:

3. Using the data you entered in part (2), change the percentage of selling and administrative overhead attributable to processing orders from 45% to 30% and the percentage attributable to supporting customers from 25% to 40%. That portion of the worksheet should look like this:

	Assembling	Processing	Supporting	Other
	Units	Orders	Customers
Manufacturing overhead	50%	35%	5%	10%
Selling and administrative overhead....	10%	30%	40%	20%
Total activity	1,000	250	100
	units	orders	customers

Relative to the results from part (2), what has happened to the customer margin under activity-based costing? Why?

Relative to the results from part (2), what has happened to the product margin under the traditional cost system? Why?