Activity-Based Costing

Ferris Corporation makes computer desks and sells to Keller Furniture.The company has two overhead departments whose costs are listed below:

Manufacturing Overhead $600,000

Marketing and selling overhead $200,000

Keller Furniture order information is stated below:

Customers: 1 customer, Orders: 20 orders,Number of desks ordered in total:70 units,Selling price: $900 per unit,Direct Materials $185 per unit, Direct labor $90 per unit.

Step 1:define activities,activity cost pool and activity measures

	assembling units	processing orders	supporting customers	Other
manufacturing overhead	50%	35%	5%	10%
marketing and selling overhead	10%	30%	40%	20%
total activity	1000	250	100	NA
	units	orders	customers	NA

Step 2: Assign overhead cost to activity cost pool

	assembling units	processing orders	supporting customers	other	total
Manufacturing overhead
marketing and selling overhead
Total cost

Step 3

Compute the activity rates

Activity Cost Pools	total cost	total activity	activity rate
assembling units		I units	I per unit
processing orders		I orders	I per order
supporting customers		I customers	I per customer

Step 4: Compute the overhead cost attribute to Keller Furniture orders

activity cost pools	activity rate	activity	ABC cost
assembling units	per unit	units
processing orders	per order	orders
supporting customers	per customer	customers

Step 5: prepare management reports

Determine the customer margin for the OfficeMart orders under Activity-Based Costing

Sales:		?
Costs:
Direct Materials	?
Direct labor	?
unit-related overhead	?
order-related overhead	?
customer-related overhead	?	?
Customer margin		?