Author Question: The Skynet Company is noted for an exceptionally impressive line of Mardi Gras masks. Skynet has ... (Read 204 times)

Arii_bell · **on:** Jul 5, 2018

The Skynet Company is noted for an exceptionally impressive line of Mardi Gras masks. Skynet has established the following selling and distribution support activity-cost pools and their corresponding activity drivers for the year 2015:

Activity Cost Cost driver
Marketing 150,000 1,250,000 of sales
Customer service 50,000 10,000 customer
Order execution 15,000 200 orders
Warehousing 15,000 125 product lines

Required:
a. Determine the activity-cost-driver rate for each of the four selling and distribution activities.
b. Under what circumstances is it appropriate to use each of the activity-cost drivers?
c. Describe at least one possible negative behavioral consequence for each of the four activity-cost drivers.

Question 2

Since the adjustments are entered on the work sheet, it is not necessary to record them in the journal or post them to the ledger.
a. True
b. False

Indicate whether the statement is true or false

princessflame2016 · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

Answer:
a. Activity-cost driver rate for Marketing = 150,000 1,250,000 = 12 of sales
Activity-cost driver rate for Customer Service = 50,000 10,000 = 5 per customer
Activity-cost driver rate for Order Execution = 15,000 200= 75 per order
Activity-cost driver rate for Warehousing = 15,000 125= 120 per order

b. For marketing, using 12 of stipulated sales is appropriate when management wants to limit marketing costs to a budgeted proportion to sales. Using the number of customers for customer service is appropriate when the customer service costs are similar enough to use the average for all customers. Using the number of orders for order execution is appropriate when all orders are sufficiently alike in terms of resources used that they can be averaged. Using the number of product lines for warehousing is appropriate when each product line requires similar proportions of the warehousing efforts.

c. For marketing, using 12 of sales limits the marketing activities to an arbitrary amount without consideration for potential opportunities. Using the number of customers for customer service can lead to customer service initiatives to limit the amount of time servicing each customer to cause the number of customers serviced to increase. Using the number of orders for order execution can result in purchasers splitting orders to increase the numbers of orders executed. Using the number of product lines for warehousing can lead warehouse personnel to designate more product line differences in the warehouse.

Answer to Question 2

False