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# Cost 7 - Driver Cost Processing order 52 orders \$520a 110...

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10.23. Activity-Based Costing of Customers: Marvin’s Kitchen Supply. a. Delivery cost based on order value: Customer Order Value Delivery Charge (@10%) City Diner ................................................. \$50,000 \$5,000 Le Chien Chaud .................................... \$60,000 6,000 b. Delivery cost based on activity-based costing: Cost driver rates: Activity Cost Driver Cost ÷ Driver Volume = Rate Processing order.. Number of orders \$50,000 ÷ 5,000 orders = \$10 per order Loading truck ........ Number of items 100,000 ÷ 100,000 items = \$1 per item Delivering merchandise ......... Number of orders 60,000 ÷ 5,000 orders = \$12 per order Processing invoice Number of invoices 48,000 ÷ 4,000 invoices = \$12 per invoice Cost of delivery: City Diner Le Chien Chaud Activity Units of Cost Driver Cost Units of Cost
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Unformatted text preview: Driver Cost Processing order. .................. 52 orders \$520a 110 orders \$1,100 Loading truck. ........................ 600 items 600b 1,500 items 1,500 Delivering merchandise. ........ 52 orders 624c 110 orders 1,320 Processing invoice. ................ 12 invoices 144 d 150 invoices 1,800 Total cost. ............................ \$1,888 \$5,720 a \$520 = 52 orders x \$10 per order. b \$600 = 600 items x \$1 per item. c \$624 = 52 orders x \$12 per order. d \$144 = 12 invoices x \$12 per invoice. c. Marvin’s can use this information to change the way they price delivery service. They can also use the information to work with customers to change the way they (customers) order to reduce the costs of order and delivery....
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