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Worksheet - Activity Based

Ferris Corporation uses an activity-based costing system to allocate its $800,000 in overhead costs across manufacturing and selling/administrative departments. It tracks costs across four activity cost pools: assembling units, processing orders, supporting customers, and other. Based on employee interviews, 50% of manufacturing overhead and 10% of selling overhead are allocated to assembling units, while 35% of manufacturing overhead and 45% of selling overhead are allocated to processing orders. The document provides cost allocations across activity pools and requests calculations to determine activity rates and overhead costs attributed to a specific customer.

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Muhammad Imran Awan
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91 views

Worksheet - Activity Based

Ferris Corporation uses an activity-based costing system to allocate its $800,000 in overhead costs across manufacturing and selling/administrative departments. It tracks costs across four activity cost pools: assembling units, processing orders, supporting customers, and other. Based on employee interviews, 50% of manufacturing overhead and 10% of selling overhead are allocated to assembling units, while 35% of manufacturing overhead and 45% of selling overhead are allocated to processing orders. The document provides cost allocations across activity pools and requests calculations to determine activity rates and overhead costs attributed to a specific customer.

Uploaded by

Muhammad Imran Awan
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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COST ACCOUNTING

ACTIVITY BASED COSTING

Ferris Corporation makes a single product—a fire-resistant commercial filing cabinet—that it


sells to office furniture distributors. The company has a simple ABC system that it uses for
internal decision making. The company has two overhead departments whose costs are listed on
the following page:
Manufacturing overhead . . . . . . . . . . . . . . . . $500,000
Selling and administrative overhead . . . . . . . 300,000
Total overhead costs . . . . . . . . . . . . . . . . . . . $800,000

Activity Cost Pool Activity Measure


Assembling units . . . . . . . . . . . Number of units
Processing orders . . . . . . . . . . Number of orders
Supporting customers . . . . . . . Number of customers
Other . . . . . . . . . . . . . . . . . . . . Not applicable

Ferris Corporation distributes the costs of manufacturing overhead and selling and administrative
overhead to the activity cost pools based on employee interviews, the results of which are
reported below:
Assemblin Processing Supporting Other Total
g order customers
Units
Manufacturing overhead 50% 35% 5% 10% 100%
Selling and administrative 10% 45% 25% 20% 100%
Overhead.
Total activity 1000 units 250 orders 100
customers

Required:
1. Perform the first-stage allocation of overhead costs to the activity cost pools.
2. Compute activity rates for the activity cost pools
3. OfficeMart is one of Ferris Corporation’s customers. Last year, OfficeMart ordered filing
cabinets four different times. OfficeMart ordered a total of 80 filing cabinets during the year.
Construct a table showing the overhead costs attributable to OfficeMart.
4. The selling price of a filing cabinet is $595. The cost of direct materials is $180 per filing
cabinet, and direct labor is $50 per filing cabinet. What is the customer margin of OfficeMart?

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