Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hamza incorporation manufactures a single product a commercial filing cabinet that it sell to office furniture distributors. The company is using a single ABC system

Hamza incorporation manufactures a single product a commercial filing cabinet that it sell to office furniture distributors. The company is using a single ABC system that it uses for internal decision making. The company has two overheads departments whose costs are listed below.

Selling and Administrative overhead

$400,000

Manufacturing overhead

$450,000

Total overhead cost

$850,000

The companys ABC system has the following activity cost pools and activity measures:

Activity Cost Pool

Activity Measure

Assembling units

Number of units

Processing orders

Number of orders

Supporting customers

Number of customers

Others

Not applicable

Costs assigned to the Other activity cost pool have no activity measure; they consist of the costs of unused capacity and organization-sustaining costsneither of which are assigned to orders, customers, or the product. Umair Corporation distributes the costs of manufacturing overhead and selling and administrative overhead to the activity cost pools based on employee interviews, the results of which are reported below:

Distribution of Resource Consumption Across Activity Cost Pool

Assembling units

Processing orders

Supporting customers

Others

Total

Manufacturing overhead

55%

25%

10%

10%

100%

Selling and Administrative overhead

15%

40%

20%

25%

100%

Total Activity 500 units 110 orders 91 customers

Required:

  1. Perform the first-stage allocation of overhead costs to the activity cost pools.
  2. Compute activity rates for the activity cost pools.
  3. Office Mart is one of Fazal Corporations customers. Last year, Office Mart ordered filing cabinets four different times.
  4. Office Mart ordered a total of 80 filing cabinets during the year. The selling price of a filing cabinet is $595. The cost of direct materials is $180 per filing cabinet, and direct labour is $50 per filing cabinet. What is the customer margin of Office-Mart?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Love Audit

Authors: Annah Conwell

1st Edition

B0B9SMDYNM, 979-8843874452

More Books

Students also viewed these Accounting questions

Question

What is the Income Summary account and what is its purpose?

Answered: 1 week ago