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 B,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 B,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

The total purchase orders are 25 (5 for A and 20 for B). The cost per purchase order is $12,000 / 25 = $480. Customer B has 20 purchase orders, so the cost allocated to B is 20 * $480 = $9,600.

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