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2. Sunshine Company sells custom made surf boards in California. The finance manager has supplied the following data from its activity-based costing system: Overhead Costs Staff Salaries $500,000 Selling and administration overheads Total Overhead Costs 200,000 $700,000 Activity Cost Pool Product design Order Processing Customer Support Others Activity Measure Number of new designs Number of Customer orders Number of Customers Organization sustaining activity Total Activity for the Year 500 new designs 700 orders 400 customers Not applicable Distribution of Resource Consumption across Activities Product Order Customer Other Total Design Processing Support 20% Staff Salaries 40% 30% 10% 100% Selling and 30% 10% 20% 40% 100% administration overheads During the year Sunshine Company completed three individual orders for a new customer, Tarpaper Inc. Two different designs of surfboards were prepared for and sold to this new customer - Orange Tangerine and Blue Waves. Data concerning the two designs and customer orders are as follows: Orange Tangerine $700 per unit $280 per unit $100 per unit Blue Waves Selling price $500 per unit $180 per unit $50 per unit Direct materials Direct labor 10 units of Orange Tangerine 20 units of Blue Waves 15 units of Orange Tangerines and 15 units of Blue Waves Order 1 Order 2 Order 3

2. Sunshine Company sells custom made surf boards in California. The finance manager has supplied the following data from its activity-based costing system: Overhead Costs Staff Salaries $500,000 Selling and administration overheads Total Overhead Costs 200,000 $700,000 Activity Cost Pool Product design Order Processing Customer Support Others Activity Measure Number of new designs Number of Customer orders Number of Customers Organization sustaining activity Total Activity for the Year 500 new designs 700 orders 400 customers Not applicable Distribution of Resource Consumption across Activities Product Order Customer Other Total Design Processing Support 20% Staff Salaries 40% 30% 10% 100% Selling and 30% 10% 20% 40% 100% administration overheads During the year Sunshine Company completed three individual orders for a new customer, Tarpaper Inc. Two different designs of surfboards were prepared for and sold to this new customer - Orange Tangerine and Blue Waves. Data concerning the two designs and customer orders are as follows: Orange Tangerine $700 per unit $280 per unit $100 per unit Blue Waves Selling price $500 per unit $180 per unit $50 per unit Direct materials Direct labor 10 units of Orange Tangerine 20 units of Blue Waves 15 units of Orange Tangerines and 15 units of Blue Waves Order 1 Order 2 Order 3

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 23E: The second stage of customer-based activity-based costing entails the assignment of: a. resource...
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2. Sunshine Company sells custom made surf boards in California. The finance manager has supplied the following data from its activity-based costing system: Overhead Costs Staff Salaries $500,000 Selling and administration overheads 200,000 Total Overhead Costs $700,000 Activity Cost Pool Product design Order Processing Customer Support Activity Measure Number of new designs Number of Customer orders Number of Customers Organization sustaining activity Total Activity for the Year 500 new designs 700 orders 400 customers Not applicable Others Distribution of Resource Consumption across Activities Product Order Customer Other Total Design Processing Support Staff Salaries 40% 30% 20% 10% 100% Selling and 30% 10% 20% 40% 100% administration overheads During the year Sunshine Company completed three individual orders for a new customer, Tarpaper Inc. Two different designs of surfboards were prepared for and sold to this new customer - Orange Tangerine and Blue Waves. Data concerning the two designs and customer orders are as follows: Orange Tangerine $700 per unit $280 per unit $100 per unit Blue Waves Selling price $500 per unit $180 per unit $50 per unit Direct materials Direct labor Order 1 10 units of Orange Tangerine Order 2 20 units of Blue Waves Order 3 15 units of Orange Tangerines and 15 units of Blue Waves
Transcribed Image Text:2. Sunshine Company sells custom made surf boards in California. The finance manager has supplied the following data from its activity-based costing system: Overhead Costs Staff Salaries $500,000 Selling and administration overheads 200,000 Total Overhead Costs $700,000 Activity Cost Pool Product design Order Processing Customer Support Activity Measure Number of new designs Number of Customer orders Number of Customers Organization sustaining activity Total Activity for the Year 500 new designs 700 orders 400 customers Not applicable Others Distribution of Resource Consumption across Activities Product Order Customer Other Total Design Processing Support Staff Salaries 40% 30% 20% 10% 100% Selling and 30% 10% 20% 40% 100% administration overheads During the year Sunshine Company completed three individual orders for a new customer, Tarpaper Inc. Two different designs of surfboards were prepared for and sold to this new customer - Orange Tangerine and Blue Waves. Data concerning the two designs and customer orders are as follows: Orange Tangerine $700 per unit $280 per unit $100 per unit Blue Waves Selling price $500 per unit $180 per unit $50 per unit Direct materials Direct labor Order 1 10 units of Orange Tangerine Order 2 20 units of Blue Waves Order 3 15 units of Orange Tangerines and 15 units of Blue Waves
Required: a. Prepare a report showing the first-stage allocation of overhead costs to the respective activity cost pools. b. Calculate the activity rates for the activity cost pools. c. Prepare a report showing the overhead costs for the orders from Tarpaper Inc. including customer support costs. d. Prepare a report showing the customer margin for Tarpaper Inc. What is the usefulness of finding the customer margin?
Transcribed Image Text:Required: a. Prepare a report showing the first-stage allocation of overhead costs to the respective activity cost pools. b. Calculate the activity rates for the activity cost pools. c. Prepare a report showing the overhead costs for the orders from Tarpaper Inc. including customer support costs. d. Prepare a report showing the customer margin for Tarpaper Inc. What is the usefulness of finding the customer margin?
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