Hi,

I have been asked to allocate costs as per activity based costing.

There are two types of customers in the business - wholesale and retail

Activity	Cost Driver	Quantity of customers	Cost rate
a	x	1500	56.66
b	x	1500	113.33
c	y	40000	61.375

Costs for each customer for each actiivity

Activity	Retail	Wholesale	Total
a	60000	25,000	85,000
b	60000	110,000	170,000
c	850,000	1,350,000	2,200,00

Total ..............................970,000 ......................1,485,000 ..................2,455,000

Amount of customers in each activity

Activity	Retail	Wholesale	Total
a	1200	300	1500
b	1200	300	1500
c	35000	50000	40000

My question is - if two cost objects are using the same cost allocation base i.e retail and wholesale having the cost driver x , when you are working out the cost rate per unit for each cost object using the same allocation base do you divide the total cost of that cost object by the total in the allocation base or the total number of that particlular cost object within the allocation base.

I am required to work out the cost rate per unit for retail and wholesale

Cost rate for each activity is achived by getting Cost of wholesale and retail /1500

For e.g

Retail makes up 1200 and wholesale 300 bringing the total to 1500 for both actiivty a and b

Do I do

Retail 60000/1500 or 60,000/1200

Wholesale 25,000/1500 or 25,000 by 300

Hope this makes sense