Question 1
Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:
|
Cost Pool
|
Total Costs
|
Cost Driver
|
Annual Activity
|
|
Packaging and shipping
|
$164,900
|
Number of boxes shipped
|
24,800 boxes
|
|
Final inspection
|
$199,800
|
Number of individual items shipped
|
99,100 items
|
|
General operations and supervision
|
$80,200
|
Number of orders
|
8,300 orders
|
During the period, the Far East sales office generated 652 orders for a total of 6,190 items. These orders were shipped in 1,365 boxes. What amount of shipping department costs should be allocated to these sales?
Question 2
Baller Financial is a banking services company that offers many different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to their various types of checking accounts. The following data relate to the money market checking accounts, one of the popular checking accounts, and the ABC cost pools:
Annual number of accounts = 52,000 accounts Checking account cost pools:
|
Cost Pool
|
Cost
|
|
Cost Drivers
|
|
Returned check costs
|
$2,760,000
|
|
Number of returned checks
|
|
Checking account reconciliation costs
|
52,000
|
|
Number of account reconciliation requests
|
|
New account setup
|
644,000
|
|
Number of new accounts
|
|
Copies of cancelled checks
|
388,000
|
|
Number of cancelled check copy requests
|
|
Online banking web site maintenance
|
189,000
|
|
Per product group (type of account)
|
|
|
|
|
|
Annual activity information related to cost drivers:
|
Cost Pool
|
All Products
|
Money Market Checking
|
|
Returned check
|
200,000 returned checks
|
18,000
|
|
Check reconciliation costs
|
388,000 checking account
|
420
|
|
New accounts
|
60,000 new accounts
|
15,000
|
|
Cancelled check copy requests
|
100,000 cancelled check
|
60,000
|
|
Web site costs
|
2 types of accounts
|
1
|
Calculate the overhead cost per account for the Money Market Checking.
Question 2
Sosa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs.Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price?