1. Compute the activity rates for the ABC system. Activity cost pools (Total cost of Quality control and inspection, Delivery and installation and Order processing) Total productivity (units produced, deliveries completed, orders processed) Activity rate (per unit, per delivery and per order) 2. Determine the overhead cost that would be assigned to the leather product line using ABC system.
Saved MovieTime Corporation produces fumiture 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. The ABC system is designed to allow direct material and direct labour to be traced directly to each of the company's four main 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 deliverles for Delivery and Installation. The Other cost pool has no activity measure. The following costs will be assigned using the ABC system: Indirect factory salaries 520, 000 Delivery crew wages expense 140, 000 Delivery vehicle operating expenses and depreciation 95,000 Procurement and order processing salaries expense 103, 000 Print Office expenses 25, 000 Other administrative expenses 225, 000 Total cost $1, 108, 000 ferences 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% 254 1303 Delivery crew wages expense 753 10 153 1003 Delivery vehicle operating expenses a 102 102 100% depreciation Procurement and order processing salaries and expenses 104 103 654 100% Office expenses 153 1001 Other administrative expenses 15 5 403 1003 The ABC system at MovieTime contains the following activity cost pools and activity rates this year. Activity Quality control and inspection Total Activity Delivery and installation 4, 800 units produced Order processing 1, 200 deliveries 920 orders processed Other None Activity data have also been supplied for the leather recliner product line: Activity Total Activity for the Quality control and inspection Leather Recliner Product Line Delivery and installation 1, 200 units produced Order processing 300 deliveries 230 orders processed Required: 1. Compute the activity rates for the ABC system
