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.       Cost Driver Volume Activity Cost Driver Cost Driver Volume Processing order Number of orders $ 126,000     9,000 orders Loading truck Number of items   340,000     200,000 items Delivering merchandise Number of orders   153,000     9,000 orders Processing invoice Number of invoices   136,000     8,000 invoices Total overhead   $ 755,000             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 Order value $ 89,000   $ 99,000   Number of orders   69     310   Number of items   600     1,900   Number of invoices   13     210       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. Delivery Charge Per CustomerCity Diner Le Chien Chaud

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
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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.
 

    Cost Driver Volume
Activity Cost Driver Cost Driver Volume
Processing order Number of orders $ 126,000     9,000 orders
Loading truck Number of items   340,000     200,000 items
Delivering merchandise Number of orders   153,000     9,000 orders
Processing invoice Number of invoices   136,000     8,000 invoices
Total overhead   $ 755,000        
 

 

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
Order value $ 89,000   $ 99,000  
Number of orders   69     310  
Number of items   600     1,900  
Number of invoices   13     210  
 

 

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.

Delivery Charge Per CustomerCity Diner Le Chien Chaud 

Expert Solution
Step 1

As per the given question delivery charges are equal to 10% of cost of supplies 

   i.e. 10% of order value from customer

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