1. Compute the activity rates for the ABC system. 2. Determine the overhead cost that would be assigned to the leather recliner product line using the ABC system.
CREX5 0 Saved Help Save & Exit Submit 5 MovieTime Corporation produces furniture and fixtures for home theatre Installations. John Jones, the owner of the company. recognized a trend in home theatre Installations starting about three years ago and began working with local design firms and home builders to offer affordable yet high-quality furnishings for new construction and renovation markets. The company's most popular product is a leather upholstered recliner with a cup holder and snack tray built into each chair's arms. Last year, John decided to Implement an ABC system to better understand the overall cost structure and to ensure he was charging competitive prices that would also allow the firm to remain profitable over the longer term. 10 points The ABC system is designed to allow direct material and direct labour to be traced directly to each of the company's four main Skipped products. The system also Includes four activity cost pools for overhead: Quality Control and Inspection, Order Processing, Delivery and Installation, and Other. The activity measures are units produced for Quality Control and Inspection, number of orders for Order Processing, and number of deliveries for Delivery and Installation. The Other cost pool has no activity measure. The following costs will be assigned using the ABC system: Book Indirect factory salaries 520, 000 Delivery crew wages expense 140,000 Delivery vehicle operating expenses and depreciation 95,000 Print Procurement and order processing salaries expense 102, 000 Office expenses 25,000 Other administrative expenses 225, 000 Total cost $1, 108,000 References The distribution of resource consumption across the activity cost pools is as follows: Quality Delivery Control and Order and Inspection Installation Processing Other Totals Indirect factory salaries 50% 253 203 1003 Delivery crew wages expense 103 15 100 Delivery vehicle operating expenses and depreciation BOS 108 1003 Procurement and order processing salaries and expenses 102 102 65% 153 1004 Office expenses 151 153 358 253 1004 Other administrative expenses 154 401 405 1003 The ABC system at MovieTime contains the following activity cost pools and activity rates this year. Activity Total Activity Quality control and inspection 4, 800 units produced Delivery and installation 1, 200 deliveries Order processing 920 orders processed Other None Activity data have also been supplied for the leather recliner product line: Total Activity for the Activity Leather Recliner Product Line Quality control and inspection 1,200 units produced Delivery and installation 300 deliveries Order processing 230 orders processed
