Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Chapter 4, Problem 19E
A.
To determine
Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).
To draft: Customer profitability report of Company SE for the year ended December 31, 20Y8
B.
To determine
To discuss: The inferences from the customer profitability report
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Activity-Based Costing and Customer Profitability
Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate:
Customer Service Activity
Activity Base
Activity Rate
Bid preparation
Number of bid requests
$400 per request
Shipment
Number of shipments
$ 80 per shipment
Support standard items
Number of standard items ordered
$ 25 per std. item
Support nonstandard items
Number of nonstandard items ordered
$150 per nonstd. item
Assume that the company had the following gross profit information for three representative customers:
Customer 1
Customer 2
Customer 3
Revenues
$120,000
$200,000
$160,000
Cost of goods sold
76,800
110,000
83,200
Gross profit…
Activity-Based Costing and Customer Profitability
Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate:
Customer Service Activity
Activity Base
Activity Rate
Bid preparation
Number of bid requests
$400 per request
Shipment
Number of shipments
$ 80 per shipment
Support standard items
Number of standard items ordered
$ 25 per std. item
Support nonstandard items
Number of nonstandard items ordered
$150 per nonstd. item
Assume that the company had the following gross profit information for three representative customers:
Customer 1
Customer 2
Customer 3
Revenues
$120,000
$200,000
$160,000
Cost of goods sold
76,800
110,000
83,200
Gross profit…
Metroid Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate:
Customer Service Activity
Activity Base
Activity Rate
Bid preparation
Number of bid requests
$420 per request
Shipment
Number of shipments
$90 per shipment
Support standard items
Number of standard items ordered
$30 per std. item
Support nonstandard items
Number of nonstandard items ordered
$180 per nonstd. item
Assume that the company had the following gross profit information for three representative customers:
Customer 1
Customer 2
Customer 3
Revenues
$130,000
$210,000
$180,000
Cost of goods sold
(81,900)
(113,400)
(90,000)
Gross profit
$48,100
$96,600
$90,000
Gross profit…
Chapter 4 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 4 - Why would management be concerned about the...Ch. 4 - Why would a manufacturing company with multiple...Ch. 4 - Prob. 3DQCh. 4 - Prob. 4DQCh. 4 - How does activity-based costing differ from the...Ch. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Under what circumstances might the activity-based...Ch. 4 - Prob. 9DQCh. 4 - Prob. 10DQ
Ch. 4 - Single plantwide factory overhead rate The total...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based costing: factory overhead costs The...Ch. 4 - Activity-based costing: selling and administrative...Ch. 4 - Activity-based costing for a service business...Ch. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Prob. 4ECh. 4 - Multiple production department factory overhead...Ch. 4 - Prob. 6ECh. 4 - Single plantwide and multiple production...Ch. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Prob. 10ECh. 4 - Prob. 11ECh. 4 - Activity cost pools, activity rates, and product...Ch. 4 - Prob. 13ECh. 4 - Prob. 14ECh. 4 - Activity-based costing and product cost distortion...Ch. 4 - Prob. 16ECh. 4 - Evaluating selling and administrative cost...Ch. 4 - Prob. 18ECh. 4 - Prob. 19ECh. 4 - Activity-based costing for a service company...Ch. 4 - Prob. 21ECh. 4 - Prob. 1PACh. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based and department rate product costing...Ch. 4 - Activity-based product costing Mello Manufacturing...Ch. 4 - Prob. 5PACh. 4 - Product costing and decision analysis for a...Ch. 4 - Single plantwide factory overhead rate Spotted Cow...Ch. 4 - Multiple production department factory overhead...Ch. 4 - Activity-based department rate product costing and...Ch. 4 - Activity-based product costing Sweet Sugar Company...Ch. 4 - Prob. 5PBCh. 4 - Prob. 6PBCh. 4 - Prob. 1ADMCh. 4 - Prob. 2ADMCh. 4 - Production run size and activity improvement...Ch. 4 - Prob. 4ADMCh. 4 - Ethics in Action The controller of Tri Con Global...Ch. 4 - Communication The controller of New Wave Sounds...
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