Question

SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:

Driver and guard wages	$	1,020,000
Vehicle operating expense		450,000
Vehicle depreciation		330,000
Customer representative salaries and expenses		360,000
Office expenses		220,000
Administrative expenses		520,000
Total cost	$	2,900,000

The distribution of resource consumption across the activity cost pools is as follows:

	Travel		Pickup and Delivery		Customer Service		Other		Totals
Driver and guard wages	50	%	35	%	10	%	5	%	100	%
Vehicle operating expense	70	%	5	%	0	%	25	%	100	%
Vehicle depreciation	60	%	15	%	0	%	25	%	100	%
Customer representative salaries and expenses	0	%	0	%	90	%	10	%	100	%
Office expenses	0	%	20	%	30	%	50	%	100	%
Administrative expenses	0	%	5	%	60	%	35	%	100	%

Required:

Complete the first stage allocations of costs to activity cost pools.

Answer 1

First stage allocation

The distribution of resource consumption across the activity cost pools is as follows:

	Travel		Pickup and Delivery		Customer Service		Other		Totals
Driver and guard wages	510000		357000		102000		51000		1020000
Vehicle operating expense	315000		22500		0		112500		450000
Vehicle depreciation	198000		49500		0		82500		330000
Customer representative salaries and expenses	0		0		324000		36000		360000
Office expenses	0		44000		66000		110000		220000
Administrative expenses	0		26000		312000		182000		520000
Total	1023000		499000		804000		574000		2900000