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	$	1,000,000
Vehicle operating expense		430,000
Vehicle depreciation		310,000
Customer representative salaries and expenses		340,000
Office expenses		200,000
Administrative expenses		500,000
Total cost	$	2,780,000

  

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.

Mickley Company’s predetermined overhead rate is $20.00 per direct labor-hour and its direct labor wage rate is $14.00 per hour. The following information pertains to Job A-500:

  

Direct materials	$280
Direct labor	$280

  

Required:

1.	What is the total manufacturing cost assigned to Job A-500?

         

2.	If Job A-500 consists of 80 units, what is the average cost assigned to each unit included in the job? (Round your answer to 2 decimal places.)

Answer 1

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

	Travel	Pickup and Delivery	Customer services	Other	Total
Driver and guard wages	500000	350000	100000	50000	1000000
Vehicle operating expense	301000	21500	0	107500	430000
Vehicle depreciation	186000	46500	0	232500	310000
Customer representative salaries and expenses	0	0	306000	34000	340000
Office expenses	0	40000	60000	100000	200000
Administrative expenses	0	25000	300000	175000	500000
Total	987000	418000	766000	699000	2870000

1) Total manufacturing cost

Direct material	280
Direct labour	280
Manufacturing overhead (280/14*20)	400
Total manufacturing cost	960

2) Average cost per unit = 960/80 = 12 per unit