Question

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 as follows:

Manufacturing overhead	$500,000
Selling and administrative overhead	300,000
Total overhead costs	$800,000

The company’s ABC system has the following activity cost pools and activity measures:

Activity Cost Pool	Activity Measure
Assembling units	Number of units
Processing orders	Number of orders
Supporting customers	Number of customers
Other	Not applicable

Costs assigned to the “Other” activity cost pool have no activity measure; they consist of organization-sustaining costs. 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:

Distribution of Resource Consumption Across Activity Cost Pools
	Assembling Units	Processing Orders	Supporting Customers	Other	Total
Manufacturing overhead	50%	35%	5%	10%	100%
Selling and administrative overhead	10%	45%	25%	20%	100%
Total activity	1,000 units	250 orders	100 customers

Please download the Excel worksheet from Blackboard. Required:

1. Perform the 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?

Answer 1