Data Manufacturing overhead Selling and administrative overhead $500,000 $300,000 Other 10% Manufacturing overhead Selling and administrative overhead Total activity Assembling Units 50% 10% 1,000 units Processing Orders 35% 45% 250 orders Supporting Customers 5% 25% 100 customers 20% OfficeMart orders: Customers Orders Number of filing cabinets ordered in total Selling price Direct materials Direct labor 1 customer 4 orders 80 units $595 $180 $50 Enter a formula into each of the cells marked with a ? below Review Problem: Activity-Based Costing Perform the first stage allocations Manufacturing overhead Selling and administrative overhead Total cost Assembling Units $ 250,000 30,000 $ 280,000 Processing Supporting Orders Customers Other $ 175,000 $ 25,000 $ 50,000 135,000 75,000 60,000 $ 310,000 $ 100,000 $ 110,000 $ $ $ Total 500,000 300,000 800,000 Compute the activity rates Activity Cost Pools Assembling units Processing orders Supporting customers Total Cost $ 280,000 $ 310,000 $ 100,000 Total Activity 1,000 units 250 orders 100 customers Activity Rate $280 per unit $1,240 per order $1,000 per customer Compute the overhead cost attributable to the OfficeMart orders Activity Cost Pools Activity Rate Assembling units $280 per unit Processing orders $1,240 per order Supporting customers $1,000 per customer Activity 80 units 4 orders 1 customer ABC Cost $22,400 $4,960 $1,000 Determine the customer margin for the OfficeMart orders under Activity-Based Costing Sales Costs: Direct materials $ 14,400 Direct labor 4,000 Unit-related overhead $22,400 Order-related overhead $4,960 Customer-related overhead $1,000 46,760 Customer margin $ 840 Determine the product margin for the OfficeMart orders under a traditional cost system Manufacturing overhead $500,000 Total activity 1,000 units Manufacturing overhead per unit $500 per unit $ 47,600 $ Sales Costs: Direct materials Direct labor Manufacturing overhead Traditional costing product margin 14,400 4,000 40,000 58,400 (10,800) $ 2. Assume that OfficeMart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 13. (Prior to completing this requirement, change all worksheet figures back to their original amounts.) B D E 1 Chapter 7: Applying Excel 2 4 3 Data Manufacturing overhead 5 Selling and administrative overhead 6 $ 500,000 $ 300,000 7 Other Assembling Units 50% 10% Processing Orders 35% 45% 250 Supporting Customers 5% 10% 20% 25% 1,000 100 customers units orders 8 Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 11 12 13 OfficeMart orders: 14 Customers 15 Orders Number of filing cabinets ordered in total 17 Selling price 18 Direct materials 19 Direct labor 16 1 customer 13 orders 80 units 595 180 $ $ $ 50 (a) What is the customer margin under activity-based costing when the number of orders increases to 13? (Enter a loss as a negative amount.) Customer margin under activity-based costing (10,320) (b) What is the product margin under the traditional costing system when the number of orders increases to 13? (Enter a loss as a negative amount.) Product margin under the traditional costing system (c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 2 If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease. If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will decrease. If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected. If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected. 3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 35% from 45% and the percentage attributable to supporting customers should be changed to 35% from 25%. A B D E 1 Chapter 7: Applying Excel 2 3 Data 4 Manufacturing overhead 5 Selling and administrative overhead 6 $ $ 500,000 300,000 7 Other Assembling Units 50% 10% 1,000 Processing Orders 35% 35% Supporting Customers 5% 35% 100 10% 20% 250 units orders customers 8 Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 11 12 13 OfficeMart orders: 14 Customers 15 Orders 16 Number of filing cabinets ordered in total 17 Selling price 18 Direct materials 19 Direct labor 1 customer 13 orders 80 units 595 $ 180 $ 50 (a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.) Customer margin under activity-based costing (b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.) Product margin under the traditional costing system - (c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the ssing orders cost pool to the supporting customers cost pool. 2 When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently. 2 When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less frequently