OFC Company of Kansas City prints specialty paper products. Its Business Services division offers inventory-management services and, upon request, desktop delivery. The division uses an activity-based costing system. The budgeted usage of each activity cost driver and cost driver rates for January 2020 for the Business Services division are as follows:

Activity	Cost Driver	Budgeted Activity	Cost-Driver Rate
Storage	Number of cartons	800,000	$0.24625
Requisition handling	Requisitions	30,000	$12.50
Pick packing	Lines	800,000	$1.50
Data entry	Lines	800,000	$0.80
	Requisitions	30,000	$1.20
Desktop delivery	Deliveries	12,000	$30.00

The division is expected to deliver 800,000 cartons in January 2020.

Requirements:

1. What is the budgeted cost for each activity and for the Business Services Division for January 2020?

2. Assume that the Business Services Division has an order from a customer for 10 cartons of paper products. The order will also require 3 requisitions, 10 lines, and desktop delivery.

1. What is the budgeted cost of this order under Business Services activity-based costing system?
2. If Business Services costs an order using a single cost rate for the entire division, with only number of cartons as the cost driver, what would be the budgeted cost of this order?
3. Explain why the costs for the order in parts a and b are different to such a large extent?
4. If you are pricing an order, would you rather use the cost generated in part a or the cost provided in part b? Explain.

3. Dories Supply Chain Management Company offers to install an electronic order processing system that transmits customer requisitions via the Internet to the Business Services Division for quick response delivery. No requisition handling or data entry will be needed once the system is fully functional. How much savings can Business Services expect from switching to the new system? List two qualitative factors Business Services should consider before deciding whether to switch to this electronic order processing system.