#Q1. Smith Corporation would like to institute an activity-based costing system to allocate overhead to its products. The company's Shipping Department incurs costs of $750,000 per year and has nine employees. The Shipping Department has determined that three major activities that occur during the year.

Activity AllocationMea #of ppl total cost

Reviewing sales invoices # of sales invoices 2 $175,000

Initiating shipping orders # of shipping orders 3 $270,000

Making phone calls # of phone calls 4 $330,000

During the year, 60,000 phone calls were made in the department; 25,000 sales invoices were reviewed; and 15,000 shipments were initiated. Product 101 required 300 phone calls, 225 sales invoice reviews, and 175 shipping orders. Product 102 required 400 phone calls, 500 sales invoice reviews, and 350 shipping orders.

a.Determine the amount of Shipping Department cost that should be assigned to each of these products.

b.Determine Shipping Department cost per unit if 2,500 units of Product 101 and 5,000 units of Product 102 were sold during the year.