Exercise 7-2 (15 minutes)

Pickup Customer
and
Travel Delivery Service Other Totals
Driver and guard wages......................... $360,000 $252,000 $ 72,000 $ 36,000 $ 720,000
Vehicle operating expense..................... 196,000 14,000 0 70,000 280,000
Vehicle depreciation.............................. 72,000 18,000 0 30,000 120,000
Customer representative salaries and
expenses............................................ 0 0 144,000 16,000 160,000
Office expenses..................................... 0 6,000 9,000 15,000 30,000
Administrative expenses........................ 0 16,000 192,000 112,000 320,000
Total cost.............................................. $628,000 $306,000 $417,000 $279,000 $1,630,000

Each entry in the table is derived by multiplying the total cost for the cost category by the percentage
taken from the table below that shows the distribution of resource consumption:

Pickup Custome
and r
Travel Delivery Service Other Totals
Driver and guard wages......................... 50% 35% 10% 5% 100%
Vehicle operating expense..................... 70% 5% 0% 25% 100%
Vehicle depreciation.............................. 60% 15% 0% 25% 100%
Customer representative salaries and
expenses............................................ 0% 0% 90% 10% 100%
Office expenses..................................... 0% 20% 30% 50% 100%
Administrative expenses........................ 0% 5% 60% 35% 100%
Exercise 7-3 (10 minutes)
Estimate
d
Overhea
Activity Cost Pool d Cost Expected Activity Activity Rate
square feet of $0.48 per square foot of
Caring for lawn..................... $72,000 150,000 lawn lawn
Caring for garden beds $26,400 20,000 square feet of low $1.32 per square foot of low
low maintenance................ maintenance beds maintenance beds
Caring for garden bedshigh $41,400 15,000 square feet of high $2.76 per square foot of high
maintenance...................... maintenance beds maintenance beds
Travel to jobs....................... $3,250 12,500 miles $0.26 per mile
Customer billing and service. . $8,750 25 customers $350 per customer

The activity rate for each activity cost pool is computed by dividing its estimated overhead cost by its
expected activity.
Exercise 7-4 (10 minutes)
K425
Activity Cost Pool Activity Rate Activity ABC
Cost
Supporting direct labor.......... $6 per direct labor-hour 80 direct labor-hours $ 480
Machine processing............... $4 per machine-hour 100 machine-hours 400
Machine setups..................... $50 per setup 1 setups 50
Production orders................. $90 per order 1 order 90
Shipments............................ $14 per shipment 1 shipment 14
Product sustaining................ $840 per product 1 product 840
Total.................................... $1,874

M67
Activity Cost Pool Activity Rate Activity ABC
Cost
Supporting direct labor.......... $6 per direct labor-hour 500 direct labor-hours $ 3,000
Machine processing............... $4 per machine-hour 1,50 machine-hours 6,000
0
Machine setups..................... $50 per setup 4 setups 200
Production orders................. $90 per order 4 orders 360
Shipments............................ $14 per shipment 10 shipments 140
Product sustaining................ $840 per product 1 product 840
Total.................................... $10,540