70.2K

Verified Solution

Link Copied!

Case study $4$: Allied west a wholesaler of specialized furniture, supplies furniture to three local retailers, Vogel, Brenner and Wisk. Exhibit $1$ presents expected revenues and costs of Allied west by customer for the upcoming year using activity$-$based costing system. Allied west's management accountant assigns costs to customers based on the activities needed to support each customer. Assume the following information:

Furniture handling labor costs vary with the number of units of furniture shipped to customers.

Allied west reserves different areas of the warehouse to stock furniture for different customers. For simplicity, we assume that furniture$-$ handling equipment in an area and depreciation costs on the equipment that allied west has already acquired are identified with individual customers $($customer level costs$).$ Any unused equipment remains idle. The equipment had a one$-$year useful life and zero disposal value.

Allied west allocates its fixed costs to each customer on the basis of the amount of warehouse space reserved for that customer.

Marketing costs varies with the number of sales visits made to customers.

Sales order costs are batch$-$ level costs that vary with the number of sales orders received from customers. Delivery processing costs are batch level costs that vary with the number of shipments made.

Allied west allocates fixed general$-$ administration costs $($facility level costs$)$ to customers on the basis of customers revenues.

Allied furniture allocates its fixed corporate office costs to sales offices on the basis of the budgeted costs of each sales office. Allied west then allocates these costs to customers on the basis of customer revenues.

Exhibit $1$:

$\backslash$table$[[,$Vogel,Brenner,Wisk,Total$],[$Revenues$,$$$500,000,$$$300,000,$$$400,000,$$$1,200,000$

Answer & Explanation Solved by verified expert

See Answer