Beta Company is preparing its annual profit plan

Accounting Apr 01, 2021

Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $12,000 for sales support should be assigned to the individual customers from the information given as follows: Customer A Customer B Units purchased 100,000 200,000 Purchase orders (annual) 5 20
What is the amount of the sales support costs that should be allocated to Customer A, assuming Beta uses purchases orders to compute activity-based costs? A. $2,400. B. $4,000. C. $8,000. D. $9,600.

Expert Solution

Answer

B .

Explanation

Computation of Sales Support Cost allocated to Customer A:

Sales Support Cost allocated to Customer A = Sales support cost * Units purchased for A / Total units purchased
= $12,000*100,000/(100,000+200,000)

= $12,000*100,000/300,000
= $4,000

So, the correct option is B "$4,000".

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