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AFM102March112011 - Introduction to Management Accounting...

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Click to edit Master subtitle style 7/7/11 Introduction to Management Accounting March 11, 2011 Review Problem 11
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7/7/11 22 Garber Company uses a traditional activity-based costing system to assign $600,000 of committed resource costs for customer service on the basis of the following information gathered from interviews with customer service personnel: ACTIVITY TIME PERCENTAGE ESTIMATED COST DRIVER QUANTITY Handle customer orders 75% 8,000 customer orders Process customer complaints 10% 400 customer complaints Perform customer credit checks 15% 450 credit checks 100% a) Compute the activity cost driver rates using this system. b) Suppose instead that Garber uses time-driven ABC to assign the $600,000 of committed resource costs to the three activities. Compute the time-driven activity cost driver rates, assuming 10,000 hours of useful work and the unit time estimates that follow: ACTIVITY UNIT TIME (HOURS) Handle customer orders 0.75 Process customer complaints 3.50 Perform customer credit checks 3.00 c) Suppose that the quantities of activities this period are 8,000 customer orders, 400 customer complaints, and 450 credit checks. Using the information and activity cost driver rates developed in part b), determine the cost assigned to each of the activities and the estimated
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AFM102March112011 - Introduction to Management Accounting...

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