Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 furnishings 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 decided 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 . . . . . . . . . . $520,000

Delivery crew wages expense ............ 140,000

Delivery vehicle operating expenses and depreciation . . . . . . . 95,000

Procurement and order processing salaries expense . . 103,000

Office expenses ........ 25,000

Other administrative expenses. . 225,000

Total cost . . . . . . . . . . . . . . . . . . . . . $1,108,000

The distribution of resource consumption across the activity cost pools is as follows

Quality control Delivery&Installation Order processing Others Total

Indirect factory salaries.......................... 50% 25% 20% 5% 100%

Delivery crew wages expense 0% 75% 10% 15% 100%

Delivery vehicle operating expenses and depreciation 0% 80% 10% 10% 100%

Procurement and order processing salaries expense 10% 10% 65% 15% 100%

Office expenses 15% 15% 35% 35% 100%

Other administrative expenses 15% 5% 40% 40% 100%

Required:

Carry out the first-stage allocations of costs to activity cost pools

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Strategy

Authors: Gerry Johnson, Kevan Scholes, Richard Whittington

2nd Edition

ISBN: 0273713108, 9780273713104

More Books

Students also viewed these Accounting questions