2. Assume that OfficeMart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 23. (Prior to completing this requirement, change all worksheet figures back to their original amounts.)

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Chapter 7: Applying Excel
Data
Manufacturing overhead	$500,000
Selling and administrative overhead	$300,000
	Assembling Units	Processing Orders	Supporting Customers	Other
Manufacturing overhead	50%	35%	5%	10%
Selling and administrative overhead	10%	45%	25%	20%
Total activity	1,000	250	100
	units	orders	customers
OfficeMart orders:
Customers	1	customer
Orders	23	orders
Number of filing cabinets ordered in total	80	units
Selling price	$595
Direct materials	$180
Direct labor	$50

(a) What is the customer margin under activity-based costing when the number of orders increases to 23? (Enter a loss as a negative amount.)

(b) What is the product margin under the traditional costing system when the number of orders increases to 23? (Enter a loss as a negative amount.)

(c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply 1

• If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease.unanswered
• If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will decrease.unanswered
• If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected.unanswered
• If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected.unanswered

3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 25% from 45% and the percentage attributable to supporting customers should be changed to 45% from 25%.

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Chapter 7: Applying Excel
Data
Manufacturing overhead	$500,000
Selling and administrative overhead	$300,000
	Assembling Units	Processing Orders	Supporting Customers	Other
Manufacturing overhead	50%	35%	5%	10%
Selling and administrative overhead	10%	25%	45%	20%
Total activity	1,000	250	100
	units	orders	customers
OfficeMart orders:
Customers	1	customer
Orders	23	orders
Number of filing cabinets ordered in total	80	units
Selling price	$595
Direct materials	$180
Direct labor	$50

(a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.)

(b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.)

(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply 2

• When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost pool to the supporting customers cost pool.unanswered
• When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently.unanswered
• When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less frequently.unanswered

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