MovieTime Corporation produces furniture and fixtures for home theatre installations. John Jones, the owner of the company, recognized a trend in home theatre installations starting about three years ago and began working with local design firms and home builders to offer affordable yet high-quality fur- nishings for new construction and renovation markets. The company's most popular product is a leather upholstered recliner with a cup holder and snack tray built into each chair's arms. Last year, John de- cided to implement an ABC system to better understand the overall cost structure and to ensure he was charging competitive prices that would also allow the firm to remain profitable over the longer term. The ABC system is designed to allow direct material and direct labour to be traced directly to each of the company's four main products. The system also includes four activity cost pools for overhead: Quality Control and Inspection, Order Processing. Delivery and Installation, and Other. The activity measures are units produced for Quality Control and Inspection, number of orders for Order Processing, and number of deliveries for Delivery and Installation. The Other cost pool has no activity measure. The following costs will be assigned using the ABC system: Indirect factory salaries . . .... 5 520.000 Delivery crew wages expense . . .. 140.000 Delivery vehicle operating expenses and depreciation . . . . . . 95.000 Procurement and order processing salaries and expenses . .... 103.000 Office expenses . ... . . . . 25.000 Other administrative expenses . 225.000 Total cost . . . . .. $1.108.000The ABC system at MovieTime contains the following activity cost pools and activity rates this year: Activity Total Activity Quality control and inspection. . . . 4,800 units produced Delivery and installation . . . . 1,200 deliveries Order processing . . . 920 orders processed Other . .. . . None Activity data have also been supplied for the leather recliner product line: Total Activity for the Leather Activity Recliner Product Line Quality control and inspection . . . . 1.200 units produced Delivery and installation. . . . . . . . . 300 deliveries Order processing. . 230 orders processedThe distribution of resource consumption across the activity cost pools is as follows: Quality Control Delivery and and Order Inspection Installation Processing Other Totals Indirect factory salaries. . . . . 50% 259 20% 5% Delivery crew wages expense . . . .. 75% 10% 15% 1003 Delivery vehicle operating expenses and depreciation . . . . . . . 80% 10% 10% 1003 Procurement and order processing salaries and expenses . . . .. 10% 107 65% 15% 100% Office expenses . . . . .. 15% 15% 35% 35% 100% Other administrative expenses. . .. 15 40% 40% 100% Required
