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Quiz Exercise 7-7 (10 minutes)
Teller wages ............................... $150, Assistant branch manager salary .. $70, Branch manager salary ................ $85,
Distribution of Resource Consumption Across Activities
Opening Accounts
Processing Deposits and Withdrawals
Processing Other Customer Transactions
Other Activities Totals Teller wages ............................... 0% 75% 15% 10% 100% Assistant branch manager salary .. 10% 15% 25% 50% 100% Branch manager salary ................ 0% 0% 20% 80% 100%
Opening Accounts
Processing Deposits and Withdrawals
Processing Other Customer Transactions
Other Activities Totals Teller wages ............................... $ 0 $112,500 $22,500 $ 15,000 $150, Assistant branch manager salary .. 7,000 10,500 17,500 35,000 70, Branch manager salary ................ 0 0 17,000 68,000 85, Total cost ................................... $7,000 $123,000 $57,000 $118,000 $305,
Teller wages are $150,000 and 75% of the tellers’ time is spent processing deposits and withdrawals:
$150,000 × 75% = $112,
Other entries in the table are similarly determined.
Exercise 7-11 (30 minutes)
- First-stage allocations of overhead costs to the activity cost pools:
Distribution of Resource Consumption Across Activity Cost Pools Direct Labor Support
Order Processing
Customer Support Other Totals Wages and salaries ......... 30% 35% 25% 10% 100% Other overhead costs ...... 25% 15% 20% 40% 100%
Direct Labor Support
Order Processing
Customer Support Other Totals Wages and salaries ......... $105,000 $122,500 $ 87,500 $ 35,000 $350, Other overhead costs ...... 50,000 30,000 40,000 80,000 200, Total cost ....................... $155,000 $152,500 $127,500 $115,000 $550, Example: 30% of $350,000 is $105,000.
- Computation of activity rates:
Activity Cost Pools
(a) Total Cost
(b) Total Activity
(a) ÷ (b) Activity Rate Direct labor support ....... $155,000 10,000 DLHs $15.50 per DLH Order processing............ $152,500 500 orders $305 per order Customer support .......... $127,500 100 customers $1,275 per customer
Exercise 7-11 (continued)
- Computation of the overhead costs for the Indus Telecom order:
Activity Cost Pool
(a) Activity Rate
(b) Activity
(a) × (b) ABC Cost Direct labor support ............. $15.50 per DLH 50 DLHs* $ 775 Order processing.. $305 per order 1 orders 305 Customer support $1,275 per customer 1 customer 1, Total ................... $2, *0.5 DLH per unit × 100 units = 50 DLHs
- The customer margin for Indus Telecom is computed as follows:
Customer Margin—ABC Analysis Sales (100 units × $295 per unit) ................ $29, Costs: Direct materials ($264 per unit × 100 units). $26, Direct labor ($25 per DLH × 0.5 DLH per unit × 100 units) ..................................... 1, Direct labor support overhead (see part 3 above) .................................................... 775 Order processing overhead (see part 3 above) .................................................... 305 Customer support overhead (see part 3 above) .................................................... 1,275 30, Customer margin ......................................... $( 505)
