Calculating Retailer’s Full Unit Cost

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.

1. Using a traditional volume-based costing approach, what is the full unit cost of a sale to Retailer B?

A. $900

B. $1140

C. $1250

D. $1500

Summary

This multiple choice question belongs to Corporate Strategy and it discusses about the full unit cost of sale to the retailer of a ground pool manufacturing company.

Total Word Count NA