Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity- based costing methods and Identified four activities. Data on these activities follow. Activity Processing order Loading truck Delivering merchandise Processing invoice Total overhead Cost Driver Number of orders Number of items Number of orders Number of invoices Order value Number of orders Number of items Number of invoices 52 600 12 Cost Driver Volume Driver Volume 5,000 orders Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City Diner Le Chien Chaud $75,000 $90,000 110 1,500 150 Cost $ 75,000 150,000 90,000 72,000 $387,000 100,000 items 5,000 orders 4,000 invoices Required: a. What would the delivery charge for each customer be under the current policy of 10 percent of order value? b. Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of delivering to each customer.
Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity- based costing methods and Identified four activities. Data on these activities follow. Activity Processing order Loading truck Delivering merchandise Processing invoice Total overhead Cost Driver Number of orders Number of items Number of orders Number of invoices Order value Number of orders Number of items Number of invoices 52 600 12 Cost Driver Volume Driver Volume 5,000 orders Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow. City Diner Le Chien Chaud $75,000 $90,000 110 1,500 150 Cost $ 75,000 150,000 90,000 72,000 $387,000 100,000 items 5,000 orders 4,000 invoices Required: a. What would the delivery charge for each customer be under the current policy of 10 percent of order value? b. Calculate the cost of each activity for both restaurants to determine the total activity-based costing estimate of the cost of delivering to each customer.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 4BE: Activity-based costing: selling and administrative expenses Jungle Junior Company manufactures and...
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