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    Activity-based costing information

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    Jog Road Company's cost system assigns MSDA expenses to customers using a rate of 33% of sales revenue. The new CFO has discovered that Jog Roads's customers differ greatly in their ordering patterns and interaction with the company's sales force. Because the CFO believes Jog Road's cost system does not accurately assign MSDA expenses to customers, he developed an ABC system and gathered the following information.

    Austin Brooke
    Sales $860,000 $790,000
    Cost of Goods Sold 415,000 380,000
    Sales representative travel 10,000 83,000
    Service customers 37,000 229,000
    Handle customer orders 9,000 26,000
    Ship to customers 48,000 150,000

    1. Using the current cost system's approach of assigning MSDA expenses to customers using a rate of 33% of sales revenue, determine the operating profit associated with Austin and with Brooke.

    Austin ___________________

    Brooke ___________________

    2. Using the activity-based costing information provided, determine the operating profit associated with Austin and with Brooke.

    Austin ___________________

    Brooke ___________________

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    https://brainmass.com/business/accounting/activity-based-costing-information-570535

    Solution Preview

    Jog Road Company's cost system assigns MSDA expenses to customers using a rate of 33% of sales revenue. The new CFO has discovered that Jog Roads's customers differ greatly in their ordering patterns and interaction with the company's sales force. Because the CFO believes Jog Road's cost system does not accurately assign MSDA expenses to customers, he developed an ABC system and gathered the following information.

    Austin ...

    Solution Summary

    Solution helps in estimating the profit Using the activity-based costing information provided

    $2.19