Question No. (2)

Advanced Products Corporation has supplied the following data for its activity-based costing system:

Overhead Costs:

-Wages and salaries

$ 300,000

-Other overhead cost

100,000

Total overhead costs

$400,000

Activity cost pool

Activity Measure

Total Activity

for the Year

Supporting direct labor

Number of direct labor-hours

15,000 DLHs

Order processing

Number of customer orders

500 orders

Customer support

Number of customers

320 customers

other

This is an organization sustaining activity

Not applicable

Distribution of Resource Consumption Across Activities

Supporting Direct Labor

Order Processing

Customer Support

Other

Total

Wages and salaries

40%

30%

20%

10%

100%

Other overhead costs

30%

10%

20%

40%

100%

During the year, Advanced Products completed one order for a new customer, Big Market. This customer did not order any other products during the year. Data concerning that order follow:

Data concerning the Big Market Order

Units ordered

10 units

Direct Labor-hours

1.7 DLHs per unit

Selling price

$370 per unit

Direct materials

$190 per unit

Direct labor

$80 per unit

Required:

1.Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.

2.Compute the activity rates for the activity cost pools.

3.Prepare a report showing the overhead costs for the order from Big Market including customer support costs.

4.Prepare a report showing the customer margin for Big Market.