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Calculating Budgeted Application Rate For Sales Ordering Activity

Question

Pool Pty Ltd manufactures above ground swimming pools for Australian households. The company sells the product at a price of $1200 to three retailers (A, B and C). The cost of goods sold for the product is $900.

Budgeted data for 20X7 is as follows:

Sales and administrative expenses of $180,000 comprise mainly personnel costs. All employees are paid at the same rate. These costs are related to three activities:

1. Sales order processing (employing one staff member)

2. After-sales customer service (employing five staff members)

3. Demonstration services (employing four staff members). These costs arise when the three major retailers request demonstration to prospective purchasers.

The activity drivers are as follows:

  • Sales ordering – number of sales orders;
  • After –sales customer service – number of service requests
  • Demonstration services – number of demonstration requests

The following activity information has been gathered for Pool Pty Ltd’s three retailers.

 

Retailer

Total

 

A

B

C

 

Sales volume

250

260

240

750

Number of sales orders

25

125

50

200

Number of service requests

110

110

180

480

Number of demonstration requests

80

90

230

400

1. Using activity-based costing, what is Pool Pty Ltd’s budgeted application rate for the sales ordering activity for 20X7?

A. $24

B. $90

C. $240

D. $900

 

Summary

This multiple choice question belongs to Corporate Strategy and it discusses about budgeted application rate for the sales ordering activity for the year for the ground pool manufacturing company.

Total Word Count NA

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