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Problem 1
Office Mart is one of Ferris Corporation’s customers. Last year, Office Mart ordered filling cabinets 4
different times. Office Mart ordered a total of 80 filing cabinets during the year. Show the overhead cost
attributable to Office Mart.
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 Office Mart?
Solution:
Activity Cost Pool Total Cost (a) Total Activity (b) Activity Rate (a/b)
Assembling units $280,000 1,000 units $280 per unit
Processing orders $310,000 250 orders $1240 per order
Supporting customers $100,000 100 customers $1000 per customers
Activity Cost Pool Activity rate (a) Total Activity (b) ABC Cost (a*b)
Assembling units $280 per unit 80 units $22400
Processing orders $1240 per order 4 orders $4960
Supporting customers $1000 per customer 1 customer $1000
Problem 2:
Traditional Costing
Direct Material 40
Direct Labor 14
Manufacturing Overhead 36 (18*2)
Production Cost $90 per unit
Direct Material 25
Direct Labor 7
Manufacturing Overhead 18 (18*1)
Production Cost $50 per unit
Activity Cost Pool Total Cost (a) Total Activity (b) Activity Rate (a/b)
Purchasing $204000 600 orders $340 per order
Processing $182000 35000 hours $5.2 per hour
Scrap/Rework $379000 2000 orders $189.5 per order
Shipping $135000 900 shipments $150 per shipment
Activity Cost Pool Activity rate Activity-Deluxe ABC Cost- Product Cost
(a) (b) (a*b)
Purchasing $340 200 orders $68000 DM 40
Processing $5.2 20,000 hours $104000 DL 14
Scrap/Rework $189.5 1000 orders $189500
Shipping $150 250 shipments $37500 MO 79.8 (399000/5000)
Activity Cost Pool Activity rate Activity-Deluxe ABC Cost- Product Cost
(a) (b) (a*b)
Purchasing $340 400 orders $136000 DM 25
Processing $5.2 15,000 hours $78000 DL 7
Scrap/Rework $189.5 1000 orders $189500
Shipping $150 650 shipments $97500 MO 12.53 (501000/40000)
Problem 3
Estimated Manufacturing Overhead 1800000
Traditional Costing
= 50 per unit
ABC Costing
Problem 2-20
Q: Find total variable cost, mixed cost, mixed cost equation, total overhead cost equation for the month
of July.
Solution:
= $140,000
Maintenance Variable cost per unit= 30,000 / 40,000 = 0.75 per unit
= $80,000
Y= mx + C