Question

Exercise 7-2 First Stage Allocation [LO7-2] SecuriCorp operates a fleet of armored cars that make scheduled...

Exercise 7-2 First Stage Allocation [LO7-2]

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 $ 1,120,000
Vehicle operating expense 550,000
Vehicle depreciation 430,000
Customer representative salaries and expenses 460,000
Office expenses 320,000
Administrative expenses 620,000
Total cost $ 3,500,000

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.

Homework Answers

Answer #1

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

Travel Pickup
and
Delivery
Customer service Other Totals
Driver and guard wages 560000 392000 112000 56000 1120000
Vehicle operating expense 385000 27500 0 137500 550000
Vehicle depreciation 258000 64500 0 107500 430000
Customer representative salaries and expenses 0 0 414000 46000 460000
Office expenses 0 64000 96000 160000 320000
Administrative expenses 0 31000 372000 217000 620000
Total 1203000 579000 994000 724000 3500000
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