Activity Based Costing
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Use the following data to answer questions 26 - 29:
Silicon Optics has supplied the following data for use in its activity-based costing system:
Overhead Costs
Wages and salaries $350,000
Other Overhead costs 200,000
Total Overhead Costs $550,000
Activity Cost Pool Activity Measure Total Activity
Direct labor support Number of direct labor hours 10,000 DLH
Order processing Number of orders 500 orders
Customer support Number of customers 100 customers
Other These costs are not allocated to products or customers Not applicable
Distribution of Resource Consumption across Activity Costs Pools
Direct
Labor
Support
Order
Processing
Customer
Support
Other
Total
Wages and Salaries 30% 35% 25% 10% 100%
Other overhead costs 25% 15% 20% 40% 100%
During the year, Silicon Optics completed an order for a special optical switch for a new customer, Indus Telecom. This customer did not order any other products during the year. Data concerning that order follows:
Data Concerning the Indus Telecom Order
Selling price $295 per unit
Units ordered 100 units
Direct materials $264 per unit
Direct labor-hours 0.5 DLH per unit
Direct labor rate $25 per DLH
26. Using Exhibit 8-5 of your text as a guide, prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.
27. Using Exhibit 8-6 of your text as a guide, compute the activity rates for the activity cost pools.
28. Prepare a report showing the overhead costs for the order from Indus Telecom, including customer support costs.
29. Using Exhibit 8-11 of your text as a guide, prepare a report showing the customer margin for Indus Telecom.
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Solution Summary
The solution explains how to allocate costs under activity based costing
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