ruperts appliance warehouse (raw) delivers appliances to retailers throughout the city. the firm adds 6…

ruperts appliance warehouse (raw) delivers appliances to retailers throughout the city. the firm adds 6 percent to the cost of the appliances to cover the delivery cost. the delivery fee is meant to cover the cost of delivery. the finance team at raw has analyzed the delivery service using activity - based costing methods and identified four activities. data on these activities follow: activity cost driver activity cost cost driver volume processing order number of orders $ 126,000 9,000 orders loading truck number of items 200,000 125,000 items delivering order number of orders 153,000 9,000 orders billing number of invoices 136,000 8,000 invoices total overhead $ 615,000 two of ruperts customers are mclean designs and neveux appliances. data for orders and deliveries to these two customers follow: mclean neveux designs appliances order value (total) $ 82,000 $ 92,000 number of orders 62 196 total number of items 700 1,200 number of invoices 10 140 required: a. what would the delivery charge for each customer be under the current policy of 6 percent of order value? b. what would the activity - based costing system estimate as the cost of delivering to each customer? complete this question by entering your answers in the tabs below. required a required b what would the activity - based costing system estimate as the cost of delivering to each customer?

ruperts appliance warehouse (raw) delivers appliances to retailers throughout the city. the firm adds 6 percent to the cost of the appliances to cover the delivery cost. the delivery fee is meant to cover the cost of delivery. the finance team at raw has analyzed the delivery service using activity - based costing methods and identified four activities. data on these activities follow: activity cost driver activity cost cost driver volume processing order number of orders $ 126,000 9,000 orders loading truck number of items 200,000 125,000 items delivering order number of orders 153,000 9,000 orders billing number of invoices 136,000 8,000 invoices total overhead $ 615,000 two of ruperts customers are mclean designs and neveux appliances. data for orders and deliveries to these two customers follow: mclean neveux designs appliances order value (total) $ 82,000 $ 92,000 number of orders 62 196 total number of items 700 1,200 number of invoices 10 140 required: a. what would the delivery charge for each customer be under the current policy of 6 percent of order value? b. what would the activity - based costing system estimate as the cost of delivering to each customer? complete this question by entering your answers in the tabs below. required a required b what would the activity - based costing system estimate as the cost of delivering to each customer?

Answer

Explanation:

Step1: Calculate delivery charge for McLean Designs under current policy

Delivery charge = Order value * 6% For McLean Designs, order value = $82,000 Delivery charge = $82,000 * 0.06 = $4,920

Step2: Calculate delivery charge for Neveux Appliances under current policy

For Neveux Appliances, order value = $92,000 Delivery charge = $92,000 * 0.06 = $5,520

Step3: Calculate activity - based cost per cost driver

Processing order cost per order = $\frac{126,000}{9,000}=14$ Loading truck cost per item = $\frac{200,000}{125,000}=1.6$ Delivering order cost per order = $\frac{153,000}{9,000}=17$ Billing cost per invoice = $\frac{136,000}{8,000}=17$

Step4: Calculate activity - based cost for McLean Designs

Processing order cost = 62 * 14 = $868 Loading truck cost = 700 * 1.6 = $1,120 Delivering order cost = 62 * 17 = $1,054 Billing cost = 10 * 17 = $170 Total activity - based cost for McLean Designs = 868 + 1,120+1,054 + 170 = $3,212

Step5: Calculate activity - based cost for Neveux Appliances

Processing order cost = 196 * 14 = $2,744 Loading truck cost = 1,200 * 1.6 = $1,920 Delivering order cost = 196 * 17 = $3,332 Billing cost = 140 * 17 = $2,380 Total activity - based cost for Neveux Appliances = 2,744+1,920 + 3,332+2,380 = $10,376

Answer:

a. McLean Designs: $4,920; Neveux Appliances: $5,520 b. McLean Designs: $3,212; Neveux Appliances: $10,376