Question
Cofab makes calculators from purchased parts. It is a manual operation consisting of three stations. Materials cost $1.25 per calculator. Several back office employees handle
Cofab makes calculators from purchased parts. It is a manual operation consisting of three stations. Materials cost $1.25 per calculator. Several back office employees handle the orders and invoices and the company has a sales force that sells the product. The following are the cost pools and cost driver information for each activity.
Activity | Driver | Driver Frequency | Cost |
Assembly | Units made | 750,000 | $562,500 |
Order processing | Orders taken | 10,000 | $200,000 |
Invoicing | Invoices mailed | 25,000 | $150,000 |
Accounting | Checks received | 50,000 | $250,000 |
Sales | Orders taken | 10,000 | $300,000 |
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Calculate the activity rates for each of the activity cost pools
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If one customer buys 5,000 units in one order, which takes 2 invoices to get payment and payment arrives in 3 checks that are processed by Accounting. What is the total cost of this customers order?
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