Question
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 |
(Show all workings)
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