Jack Ryan Technologies, Inc. (JRT) a family-owned business incorporated in 2017, manufactures high-end computing equipment. Edwina Monash, the chief executive officer (CEO) and chair of the board for the company, has just been provided with a report by her Chief Financial Officer (CFO), Olivia Hollingsworth. Olivia has been arguing for the implementation of an activity-based costing system, which she feels will result in more accurate product costing, as well as greater precision in determining customer margins. The report indicates that the companys overhead costs in the last fiscal year totalled $410,100. The two major overhead costs making up this total were Salaries and Benefits amounting to $270,300, and Incidental Overhead Costs amounting to $139,800. Olivia has been diligently studying the activities involved in carrying out the companys operations, and she feels that the overhead costs could be divided among three activity cost pools as follows:

Activity Cost Pool Activity Measure Total Activity

Direct Labour Support Number- of direct labour-hours 6,200 DLHs

Order Processing Number- of Orders 240 orders

Customer Support Number- of Customers 960 customers

Other Not allocated to products or customers N/A

As a result of her observation of the operations of the company, Olivia has also been able to determine the distribution of overhead resources across these activity cost pools, and has presented her observations in the following table:

Distribution of Resource Consumption across Activity Cost Pools

Direct Labour Support Order Processing Customer- Support Other Total

Salaries & Benefits 20% 10% 30% 40% 100%

Incidental Overhead Costs 40% 20% 30% 10% 100%

During the past year, a new customer, Alex Rider Inc. (AR), placed a one-time special order for solid state drives. The customer did not order any other products. Although JRT completed the order for this customer, Olivia is a bit sceptical about whether the order was actually profitable. She feels that implementing an ABC system will enable JRT to more accurately gauge customer margins. Information on the AR order is given below:

Selling price $480 per unit

Units ordered 460 units

Direct materials 140 per unit

Direct labour-hours 0.20 per unit

Direct labour rate $27 per DLH

Required:

1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools. 4 marks

2. Determine the activity rates for the activity cost pools. 6 marks

3. Prepare a report indicating the overhead costs for the AR order. 6 marks

4. Prepare a report showing the customer margin for AR. 4 marks