Activity Cost Rate

Input information
Schedule of Selling and Administrative
Activity		Costs Activity Activity Cost Rate	Actual Cost Driver Level	Activity Cost
Make sales calls		$60 per sales call	60 sales calls	$ 3,600
Prepare sales orders		$10 per sales order	900 sales orders	9,000
Handle inquiries		$5 per minute	1,000 minutes	5,000
Ship products		$1 per CCase sold	50,000 cases	50,000
Process invoices		$20 per invoice	950 invoices	19,000
Process credits $		20 per notice	40 notices	800
Process billings and collections		$7 per billing	1,050 billings	7,350
Total selling and administrative activity costs				$94,750

Activity	Planned Activity Cost Rate	Planned Annual Cost Driver Level
Make sales calls	$60	59
Prepare sales orders	$10	850
Handle inquiries	$5.10	1,000
Ship products	$0.60	50,000
Process invoices	$1	500
Process credits	$10	5
Process billings and collections	$4	600


Activity	Activity Cost Rate	Activity Cost Driver Level
Make sales calls	$60	60
Prepare sales orders	$10	900
Hand inquiries	$5	1000
Ship products	$0.60	50,000
	percentage cost	Sales revenue
Customer Service Agency	1.5%	250,000

Question 1
Star Bakery
Income Statement for the Customer Group
Sales
Sales per CCase	No. of cases
$ 5.00	50,000	$ 250,000.00
Cost of Goods Sold
Unit cost Per Case	No. of cases
$ 3.50	50,000	$ 175,000.00
Gross Margin		$ 75,000.00
Less: Selling and administrative costs
Make sales calls	$3,600
Prepare sales orders	$9,000
Hand inquiries	$5,000
Ship products	$30,000
Customer Service Agency	$ 3,750.00	$51,350
Operating Income		$ 23,650.00


Question 2
Activity	Activity Cost Rate	Activity Cost Driver Level	Activity Cost
Make sales calls	$60	59	$3,540
Prepare sales orders	$10	850	$8,500
Hand inquiries	$5	1000	$5,100
Ship products	$0.60	50,000	$30,000
	percentage cost	Sales revenue
Customer Service Agency	1.5%	250,000	$3,750
			$50,890


Question 3: Differences between planned activity costs and customer budgeted activity
Planned activity cost	Budgeted activity costs	Difference
$51,350	$50,890	$ 460.00


Question 4
Initial Activity Cost	Activity cost after outsourcing	Cost savings from outsourcing and changing freight companies
$ 94,750.00	$ 51,350.00	$ 43,400.00