Question

Activity-Based Costing: Selling and Administrative Expenses

Jungle Junior Company manufactures and sells outdoor play equipment. Jungle Junior uses activity-based costing to determine the cost of the sales order processing and the customer return activity. The sales order processing activity has an activity rate of $81 per sales order, and the customer return activity has an activity rate of $20 per return. Jungle Junior sold 20,000 swing sets, which consisted of 5,200 orders and 500 returns.

a. Determine the total sales order processing and customer return activity cost for swing sets.
$

b. Determine the per-unit sales order processing and customer return activity cost for swing sets. If required, round your answer to the nearest cent.
$per unit

Answer 1

a) Sales order processing cost = $81 per sales order

Customer return activity cost = $20 per return

Total sale order processing cost = Sales order processing cost x Number of orders

= 81 x 5,200

= $421,200

Total customer return activity cost = Customer return activity cost per return x Number of return

= 20 x 500

= $10,000

b)

Per unit sales order processing cost = Total sales order processing cost/Number of units

= 421,200/20,000

= $21.06

Per units customer return activity cost = Total customer return activity cost/Number of units

= 10,000/20,000

= $0.5

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