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Midwest Office Products was a regional distributor of office supplies to institutions and commercial businesses. Midwest wanted to accurately allocate the cost of its distribution

Midwest Office Products was a regional distributor of office supplies to institutions and commercial businesses. Midwest wanted to accurately allocate the cost of its distribution center activities to its final products. Midwest has identified the following overhead costs and the associated cost drivers

Activity

Cost (Rs)

Driver

Driver Quantity

Receiving and Storing

432,000

Cartons Received

80,000

Manual order entry Entering order

100,000

No of manual orders

50,000

Manual Order Entry verification of items

480,000

No. of items in the manual orders

240,000

Online orders verifying

360,000

No. of online orders

30,000

Commercial Delivery

450,000

Cartons Delivered

75,000

Personal Delivery

450,000

Truck Driver Hours

6,000

Note:

1. Entering manuals orders (Required only for manual orders, not required for online orders)

2. Verifying individual line items (Required only for manual orders, not required for online orders)

3. Verifying online orders (Required only for online orders, not required for manual orders)

Given below are five different types of orders that are representative of the typical orders received by Midwest. Based on the use of activity based costing, calculate the overall profits associated with each order size.

Particulars

Order 1

Order 2

Order 3

Order 4

Order 5

Total Sales Price

610

634

6100

6340

6100

Total DM + DL

500

500

5000

5000

5000

Cartons per order

1

1

10

10

10

Cartons Delivered Commercially

Yes

No

Yes

No

Yes

Cartons Delivered Personally

No

Yes

No

Yes

No

Delivery Time (Driver Hours)

0

4 Hrs.

0

4 Hrs.

0

Manual Order

No

Yes

No

Yes

Yes

Items per Order

1

1

10

10

10

Online Order

Yes

No

Yes

No

No

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