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Kramer Office Supplies offers a number of different products to its customers

Economics

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Kramer Office Supplies offers a number of different products to its customers. It currently allocates its ordering and delivery costs to its residential and business customer groups on the basis of order value. However, the company has recently decided to implement activity-based costing starting in 2022 to assign these costs to customers. Key data for 2021 are as follows:

 

ActivityActivity

CostActivity BaseActivity

Volume

ResidentialActivity

Volume

BusinessTotal

Activity

VolumeSales (order value)    $3,580,000 $2,930,000 $6,510,000 Order processing$954,000 No. of orders 6,010  2,290  8,300 Generating sales 759,000 No. of sales calls 1,700  4,100  5,800 Sales follow-up 819,000 No. of follow-ups 102  408  510 Processing change orders 58,000 No. of change orders 190  220  410 Delivery 1,272,383 No. of deliveries 5,960  4,440  10,400 Total$3,862,383           

 

Kramer has 1,990 residential customers and 510 business customers.

 

Required:

1. Compute the cost per customer for residential and business customers for 2021, using the current system of cost allocation. (Do not round intermediate calculations. Round "Cost per customer" to 2 decimal places and the rest to the nearest whole dollar amount.)

 

 

 

 

 

2. Assume that the 2021 data will hold for 2022. Compute the cost per customer for residential and business customers for 2022 using the proposed system of cost allocation. In doing so, calculate the overhead allocation rate for each activity, and use these rates to assign costs to the two customer groups. (Round your intermediate calculations and final answers to 2 decimal places.)

 

 

 

 

 

 

 

3.

 This part of the question is not part of your Connect assignment.