Brewer Corporation Would Like to Institute an Activity-Based Costing System

question 172

Essay

Brewer Corporation would like to institute an activity-based costing system to allocate overhead to its products.The company's Shipping Department incurs costs of $750,000 per year and has nine employees.The Shipping Department has determined that three major activities that occur during the year.

Activity	Measure	# of People	Total Cost
Reviewing sales invoices	# of sales invoices	2	$175,000
Initiating shipping orders	# of shipping orders	3	$270,000
Making phone calls	# of phone calls	4	$330,000

During the year,60,000 phone calls were made in the department;25,000 sales invoices were reviewed;and 15,000 shipments were initiated.Product 101 required 300 phone calls,225 sales invoice reviews,and 175 shipping orders.Product 102 required 400 phone calls,500 sales invoice reviews,and 350 shipping orders.
a. Determine the amount of Shipping Department cost that should be assigned to each of these products.
b. Determine ShippingDepartment cost per unit if 2,500 urits of Product 101 and 5,000 units of Product 102 were sold chuing the vear.

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Definitions:

Nominal Group Technique

A structured method for group brainstorming that encourages contributions from everyone in the group by having members write down their ideas and then collectively discussing and ranking them.

Delphi Technique

A method used to gather data and achieve consensus among experts through multiple rounds of questioning and feedback.

Rational Decision-Making Technique

A systematic approach to make decisions that are logical and based on available information, without letting emotions interfere.

Punctuated Equilibrium Model

A theory in evolutionary biology that posits that species experience long periods of stability interrupted by brief phases of significant change.