Chapter 7

On Bored is a company that manufactures specialty desks for computer users that play a lot of computer games. The CEO of this company has decided to move to an Activity Based Costing system. The data from the new ABC system is listed below. Additionally, there are data from one of On Boreds customers, Procrastinet a software developer, as well.

Overhead Costs

Cost

Wages and Salaries

$350,000.00

Other Overhead Costs

$150,000.00

Total Overhead Costs

$500,000.00

Activity Cost Pool

Activity Measure

Total Activity for the Year

Assembly

Number of Direct Labour Hours

25,000

Delivery

Number of Customer Orders

500

Customer Support

Number of Customers

400

Other

costs not allocated to products or customers

N/A

Distribution of Resource Consumption Across Activities

Volume-Related

Order-Related

Customer Support

Other

Total

Wages and Salaries

30.00%

20.00%

40.00%

10.00%

100.00%

Other Overhead Costs

50.00%

10.00%

20.00%

20.00%

100.00%

Data concerning Procrastinet's Order

Data concerning Procrastinet's Order

Units Ordered

16

units

Direct Labour-Hours

4

DLHs per unit

Selling Price

$450.00

per desk

Direct Materials

$225.00

per desk

Direct Labour

$12.00

per hour

Using the above data, complete the following in regards to On Bored:

1. Prepare report showing first-stage allocations of overhead costs to the activity cost pools. 9 marks
2. Compute the activity rates for the activity cost pools. 3 marks
3. Prepare a report showing the overhead costs for the order from Procrastinet. 2 marks
4. Prepare a report showing the product margin for the order and the customer margin for Procrastinet. 10 marks