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The Chapter 7 Form worksheet is to be used to create your own worksheet version of the Review Problem for Activity Based Costing found in the text (include a link of the problem).

2. Assume that OfficeMart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 14. (Prior to completing this requirement, change all worksheet figures back to their original amounts.)

Manufacturing Overhead $500,000

Selling and Administrative Overhead $300,000

(a) What is the customer margin under activity-based costing when the number of orders increases to 14? (Enter a loss as a negative amount.)

(b) What is the product margin under the traditional costing system when the number of orders increases to 14? (Enter a loss as a negative amount.)

(c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

check all that apply 1

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease.unanswered

If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will decrease.unanswered

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected.unanswered

If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected.unanswered

3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 25% from 45% and the percentage attributable to supporting customers should be changed to 45% from 25%.

(a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.)

(b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.)

(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount?