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6.8 Exercise Ferris Corporation makes a single product-a fire-resistant commercial filing cabinet- that it sells to office furniture distributors. The company has a simple ABC
6.8 Exercise Ferris Corporation makes a single product-a fire-resistant commercial filing cabinet- that it sells to office furniture distributors. The company has a simple ABC system that it uses for internal decision making. The company has two overhead departments whose costs are listed on the following page: Manufacturing overhead. Selling and administrative overhead Total overhead costs $500,000 300,000 $800,000 The company's ABC system has the following activity cost pools and activity measures: Activity Cost Pool Activity Measure Number of units Assembling units Processing orders Supporting customers Other Number of orders Number of customers Not applicable Costs assigned to the "Other" activity cost pool have no activity measure; they consist of the costs of unused capacity and organization-sustaining costs-neither of which are assigned to orders, customers, or the product. Ferris Corporation distributes the costs of manufacturing overhead and selling and administrative overhead to the activity cost pools based on employee interviews, the results of which are reported below: Distribution of Resource Consumption Across Activity Cost Pools Manufacturing overhead Selling and administrative overhead Total activity. Assembling Units Processing Supporting Orders Customers Other Total 50% 35% 5% 10% 100% 10% 45% 25% 20% 100% 1,000 250 100 units orders customers Required: 1. Perform the first-stage allocation of overhead costs to the activity cost pools. 2. Compute activity rates for the activity cost pools
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