Fence Industries 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:
$$\begin{array} { | l | c | c | }
\hline & \text { Customer A } & \text { Customer B } \
\hline \text { Units purchased } & 100,000 & 200,000 \
\hline \text { Purchase orders (annual) } & 5 & 20 \
\hline
\end{array}$$
What is the amount of the sales support costs that should be allocated to Customer A,assuming Fence uses purchases orders to compute activity-based costs?
A) $2,400.
B) $4,000.
C) $8,000.
D) $9,600.

Question

Fence Industries 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: 
$$\begin{array} { | l | c | c | } 
\hline & \text { Customer A } & \text { Customer B } \
\hline \text { Units purchased } & 100,000 & 200,000 \
\hline \text { Purchase orders (annual) } & 5 & 20 \
\hline
\end{array}$$
What is the amount of the sales support costs that should be allocated to Customer A,assuming Fence uses purchases orders to compute activity-based costs?
A) $2,400.
B) $4,000.
C) $8,000.
D) $9,600.

Quizplus · Accepted Answer

Since the question specifies that Fence Industries uses purchase orders to compute activity-based costs, we can assume that the sales support cost of $12,000 will be allocated based on the number of purchase orders placed by each customer. From the table provided, we can see that Customer A placed 20% of the total purchase orders, which would result in them being allocated 20% of the sales support cost ($12,000 x 0.20 = $2,400). Therefore, the correct answer is A) $2,400.

Fence Industries Is Preparing Its Annual Profit Plan What Is the Amount of the Sales Support Costs That