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Activity Cost Rate

Activity Cost Rate

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 case 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 enquiries $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 per case 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 adminstrative costs
Make sales calls $3,600
Prepare sales orders $9,000
Hand enquiries $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 enquiries $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
Question 3: Differences between planned activity costs an 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


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Activity Cost Rate

The following Exercises and/or Problems are required for the course.

Activity Cost Rate

Activity Cost Rate

Exercise(s) and/or Problem(s):

  • Complete Chapter 18: Case 3

The textbook reading is from

  • Financial and Managerial Accounting 10th Edition by Belverd E. Needles, Martin Powers, and Susan V Crosson

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