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:
$$\begin{array} { | l | r | r | }
\hline & { \text { Customer A } } & { \text { Customer B } } \
\hline \text { Units purchased } & 100,000 & 200,000 \
\hline \text { Purchase orders (annual) } & 5 & 20 \
\hline
\end{array}$$
-
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:
$$\begin{array} { | l | r | r | } 
\hline & { \text { Customer A } } & { \text { Customer B } } \
\hline \text { Units purchased } & 100,000 & 200,000 \
\hline \text { Purchase orders (annual) } & 5 & 20 \
\hline
\end{array}$$
-
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

The sales support costs should be allocated based on the number of purchase orders. Customer A has 5 purchase orders out of a total of 25 (5 for A and 20 for B). Therefore, the allocation for Customer A is $ \frac{5}{25} \times 12,000 = 2,400 $.

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

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