Question. ABC Costing; ABM
Taylors Cheesecakes supplies cheesecakes to three large supermarket chains.
Management has become concerned about the rising costs associated with the processing and
dispatch of orders. An activity analysis of the indirect costs identified the following customer
related costs.
Total Use of cost driver
Expected Use Supermarket
Estimated Of Cost Customer
Activity cost pool Cost Driver Indirect Costs Driver* 1 2 3
Orders processing Number of Orders PGK 200,000.00 450 300 100 50
Returns processing Number of Returns PGK 50,000.00 100 50 25 25
Delivery Number of Deliveries PGK 100,000.00 700 400 200 100
Rush Orders Number of rush orders PGK 70,000.00 50 10 20 20
Sales Visits Number of visits PGK 20,000.00 100 50 25 25
* Expressed in units of measure of the driver.
Sales are marked up 50% on costs.
Required.
a. Calculate the activity cost rate for each activity.
b. Assign the activity costs to each of the three customers.
c. Calculate the contribution margin for each customer if the sales pattern for each is as
follows: Customer 1 – PGK300,000.00; Customer 2 – PGK150,000.00; Customer 3 –
PGK200,000.00.