Question

Advanced Products Corporation has supplied the following data from its activity-based costing system:Overhead Costs:Wages and salaries $300,000Other overhead costs 100,000Total overhead costs $400,000Activity Cost Pool Activity Measure Total ActivitySupporting direct labor Number of direct labor-hours 20,000 DLHsOrder processing Number of customer orders 400 ordersCustomer support Number of customers 200 customersOther This is an organization-sustaining activity Not applicableDistribution of Resource Consumption Across ActivitiesDirect Labor Support Order Processing Customer Support Other TotalWages and salaries 40% 30% 20% 10% 100%Other overhead costs 30% 10% 20% 40% 100%During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises.This customer did not order any other products during the year.Data Concerning the Shenzhen Enterprises Order:Units ordered 10 unitsDirect labor-hours 2 DLHs per unitSelling price $300 per unitDirect materials $180 per unitDirect labor $50 per unitRequired:1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.2. Compute the activity rates for the activity cost pools.(Round "Direct labor support" to 2 decimal places)3. Compute the overhead costs for the order from Shenzhen Enterprises, including customer support costs.

Answer 1

Answer:

1. First stage allocations of overhead costs to the activity cost pool

                                      D.L.S$       O.P$      C.S$      Others$      Total$

Wages and Salaries    120,000    90,000   60,000    30,000   300,000

Other overhead costs 30,000     10,000    20,000    40,000   100,000

Total Cost                    150,000   100,000  80,000   70,000   400,000

Note: D.L.S =  Direct labor support, O.P = Order processing, C.S =  Customer support

2. Computation of activity rates

Direct labor support

Total cost = $150,000

Total Activity = 20,000 direct labor hours

Activity rate = $150,000 / 20,000 DHL = $7.50 per DHL

Order Processing

Total cost = $100,000

Total Activity = 400 Orders

Activity rate = $100,000 / 400 DHL = $250 per Order

Customer Support

Total cost = $80,000

Total Activity = 200 Customers

Activity rate = $80,000 / 200 Customers = $400 per Customers

3. Computation of the overhead costs for the Shenzhen Enterprises Order

Direct labor Support

Activity Rate = $7.50 per DLH

Activity = 20 DHL

Cost = $7.50 per DHL* 20 DHL = $150

Order processing

Activity Rate = $250 per order

Activity = 1 order

Cost = $250 per order * 1 order = $250

Customer support

Activity Rate = $400 per customer

Activity = 1 Customer

Cost = $400 per Customer * 1 Customer = $400

Total Overhead Cost = $150 + $250 + $400

Total Overhead Cost = $800

Total Overhead Cost for the Shenzhen Enterprises Order is $800

Answer 2

The activity rate is the ratio between the number of active people (employed and unemployed) and the total number of people involved, this is calculated as one of the significant part of Activity-based Costing.

What is ABC Costing?

Activity-based (ABC) is a cost-effective method that identifies activities in an organization and provides the cost per job for all products and services depending on the actual use of each.

This model, therefore, offers an overhead cost over direct costs compared to normal costs.

1. As per the information provided, the report showing the first-stage allocations of overhead costs to the activity pools is calculated and presented in the image below.

2. Calculation of activity rates of Advanced Products Corporation:

$\rm\,Direct\; Labor \;Support:\\\\Total \;Cost = \ 150,000\\\\Total \;Activity = 20,000 Direct\; Labor\; Hours\;(DLH)\\\\Activity \;Rate = \dfrac{\ 150,000}{20,000} \rm\,DLH\\\\ Activity \;Rate =\ 7.50 \;per\; DLH$

Calculating further the activity rate of Order processing and customer support:

$\rm\, Order \;Processing:\\\ \rm\,Total \;cost = 100,000\\\\ \rm\,Total \;Activity = 400 Orders\\\\\\rm\,Activity\; rate = \dfrac{\ 100,000}{400}\rm\,Direct \,Labour \,Hours \\\\\\\rm\,Activity rate == 250\; per\; Order\\\\\ \rm\,Customer Support:\\\\ \rm\,Total \;Cost = 80,000\\\\ \rm\,Total\; Activity = \rm\,200\; Customers\\\\ \rm\,Activity \;rate = \rm\, \dfrac{\ 80,000}{200 }\;Customers\\\\\rm\, Activity \;rate = \rm\,\ 400 \rm\,\;per\; Customers$

3)Computation of the overhead costs for the Shenzhen Enterprises Order:

$\rm\,Direct \;labor \;Support:\\\\Activity \;Rate = 7.50 \;per \;DLH\\\\Activity = 20 \;DLH\\\\\rm\,Cost = \ 7.50 \rm\, Per DHL \times 20 \rm\,DHL \\\\\rm\,Cost = \ 150$

$\rm\,Order \;processing:\\\\Activity\; Rate = \ 250 per \;order\\\\Activity\; = 1 \;order\\\\Cost = \ 250 \rm\;per \;order \times 1 \;order \\\\Cost = \ 250$

Calculating further the activity rate of customer support:

$\rm\,Customer\; support:\\\\Activity \;Rate = \ 400 \;per\; customer\\\\Activity = 1 \;Customer\\\\Cost = \ 400 \rm\;per \;Customer \times 1 \;Customer \\\\Cost = \ 400$

Total Overhead Cost is ($150 + $250 + $400),Total Overhead Cost for the Shenzhen Enterprises Order is $800

Thus, as per the information, the activity rates of Advanced products corporation and the total overhead costs of Shenzhen Enterprises are calculated by applying the costing method given under ABC Analysis.

To learn more about Activity-based (ABC), refer to the link:

https://brainly.com/question/6654166