Bethilda's Brooms manufactures brooms which it sells to merchandising firms such as Quality Quidditch Supplies (QQS), Brooms 'R Us (BRU), Broom-Mart (BM), Broom City (BC), Best Brooms (BB), and Clean Sweep (CS).

The list price of a broom is $48, and the full manufacturing costs are $28.

Salespeople receive a commission on sales; the commission of $30 per order is based on number of orders taken and paid in addition to regular salary. Bethilda's Brooms makes products based on anticipated demand; however, Bethilda carries an inventory of brooms, so rush orders do not result in any extra manufacturing costs over and above the $28 per broom.

Bethilda's Brooms ships finished product to the customer at no additional charge to the customer for either regular or expedited delivery. Bethilda incurs significantly higher costs for expedited deliveries than for regular deliveries. Expected and actual customer-level cost driver rates are provided.

Activity

Order taking (excluding sales commission) $30 per order

Product handling$1.90 per unit

Delivery $2.00 per km driven

Expedited (rush) delivery $320.00 per shipment

Because salespeople are paid $30 per order, they break up large orders into multiple smaller orders. This practice reduces the actual order-taking cost by $18 per smaller order (from $30 per order to $12 per order) because the smaller orders are all written at the same time. This lower cost rate is not included in budgeted rates because salespeople create smaller orders without telling management or the accounting department. Also, sales people offer customers discounts to entice them to place more orders; Brooms'R Us and Broom-Mart each receive a 10% discount off the list price of $48.

Information about Bethilda's clients during 2019 is as follows: QQS BRU BM BC BB CS Total number of units purchased 270 580 400 140 460 1,500 Number of actual orders W 17 3 W 6 15 Number of written orders per actual order W 2* 4 W 6 3 Total number of km driven to deliver all products 80 134 72 46 316 120 Number of expedited deliveries 0 6 0 0 4 W *Because BRU places 17 separate orders, its order costs are $30 per order. All other orders are multiple smaller orders and so have actual order costs of $12 each