Deacon Corp. is a forms distribution company that captured market share by offering to store a clients forms and then will pick, pack, and ship requested forms on demand. Clients are charged for the direct cost of the forms and an overhead charge based on square footage of storage space used during the year. Overhead is budgeted at $200,000 per year.

In order to get a better understanding of the cost of servicing clients, an ABC system was proposed. After interviewing a number of production personnel, the ABC project

Activity	Budgeted Cost	Driver	Available Capacity
Processing orders received	$ 30,000	#of orders	1,000 orders
Picking orders	$ 50,000	Picking hours	4,000 hours
Forms storage	$ 120,000	Square feet	5,000 sq. ft.

Manager identified the following activities and drivers for the coming year:

The activity profiles of two clients for the past year were also prepared to determine whether or not the extra effort to compute the more detailed cost analysis would result in any differences in cost assignment.

Item	Customer 1	Customer 2
Direct cost of forms	$3,000	$5,000
Number of orders	50	12
Picking hours	250	18
Square feet used	100	150

Required:

1. Calculate the cost of servicing each customer using square footage as the overhead allocation base.
2. Calculate the cost of servicing each customer using the proposed ABC system.
3. What accounts for the difference in the cost per customer between the two overhead assignment methods?