Taylor's Cafe Supply Company delivers restaurant supplies throughout the city.Taylor's adds 4% to the order cost to cover the delivery cost.The delivery fee is meant to just cover the cost of delivery.A consultant has analyzed the delivery service using activity-based costing methods and identified four activities.Data on these activities are:
$$\begin{array} { | l | l | r | l | }
\hline \text { Activity } & \text { Cost Driver } & \text { Cost } & \begin{array} { l }
\text { Driver } \
\text { Volume }
\end{array} \
\hline \text { Process order } & \begin{array} { l }
\text { number of } \
\text { orders }
\end{array} & \$ 25,000 & \begin{array} { l }
4,000 \
\text { orders }
\end{array} \
\hline \text { Load truck } & \begin{array} { l }
\text { number of } \
\text { items }
\end{array} & 50,000 & \begin{array} { l }
80,000 \
\text { items }
\end{array} \
\hline \begin{array} { l }
\text { Deliver } \
\text { merchandise }
\end{array} & \begin{array} { l }
\text { number of } \
\text { orders }
\end{array} & 30,000 & \begin{array} { l }
4,000 \
\text { orders }
\end{array} \
\hline \text { Process invoice } & \begin{array} { l }
\text { number of } \
\text { invoices }
\end{array} & 24,000 & \begin{array} { l }
6,000 \
\text { invoices }
\end{array} \
\hline \text { Total overhead } & & \$ 129,000 &
\end{array}$$
Two of Taylor's customers are City Diner and Le Chien Chaud.Below are data on orders and deliveries to these two customers:
$$\begin{array} { | l | r | r | }
\hline & \text { City Dines } & \text { Le Chien Chaud } \
\hline \text { Order value } & \$ 24,000 & \$ 32,000 \
\hline \text { Number of orders } & 50 & 100 \
\hline \text { Number of items } & 550 & 1,600 \
\hline \begin{array} { l }
\text { Number of } \
\text { inwoices }
\end{array} & 12 & 120 \
\hline
\end{array}$$
Required:
(a)What would be the delivery charge for each customer under the current policy of 4% of order value?
(b)What would the activity-based costing system estimate as the cost of delivering to each customer?

Question

Taylor's Cafe Supply Company delivers restaurant supplies throughout the city.Taylor's adds 4% to the order cost to cover the delivery cost.The delivery fee is meant to just cover the cost of delivery.A consultant has analyzed the delivery service using activity-based costing methods and identified four activities.Data on these activities are:
 $$\begin{array} { | l | l | r | l | } 
\hline \text { Activity } & \text { Cost Driver } & \text { Cost } & \begin{array} { l } 
\text { Driver } \
\text { Volume }
\end{array} \
\hline \text { Process order } & \begin{array} { l } 
\text { number of } \
\text { orders }
\end{array} & \$ 25,000 & \begin{array} { l } 
4,000 \
\text { orders }
\end{array} \
\hline \text { Load truck } & \begin{array} { l } 
\text { number of } \
\text { items }
\end{array} & 50,000 & \begin{array} { l } 
80,000 \
\text { items }
\end{array} \
\hline \begin{array} { l } 
\text { Deliver } \
\text { merchandise }
\end{array} & \begin{array} { l } 
\text { number of } \
\text { orders }
\end{array} & 30,000 & \begin{array} { l } 
4,000 \
\text { orders }
\end{array} \
\hline \text { Process invoice } & \begin{array} { l } 
\text { number of } \
\text { invoices }
\end{array} & 24,000 & \begin{array} { l } 
6,000 \
\text { invoices }
\end{array} \
\hline \text { Total overhead } & & \$ 129,000 &
\end{array}$$ 
Two of Taylor's customers are City Diner and Le Chien Chaud.Below are data on orders and deliveries to these two customers:
$$\begin{array} { | l | r | r | } 
\hline & \text { City Dines } & \text { Le Chien Chaud } \
\hline \text { Order value } & \$ 24,000 & \$ 32,000 \
\hline \text { Number of orders } & 50 & 100 \
\hline \text { Number of items } & 550 & 1,600 \
\hline \begin{array} { l } 
\text { Number of } \
\text { inwoices }
\end{array} & 12 & 120 \
\hline
\end{array}$$ 
Required:
(a)What would be the delivery charge for each customer under the current policy of 4% of order value?
(b)What would the activity-based costing system estimate as the cost of delivering to each customer?

Quizplus · Accepted Answer

The Answer of Taylor's Cafe Supply Company delivers restaurant supplies throughout the city.Taylor's adds 4% to the order cost to cover the delivery cost.The delivery fee is meant to just cover the cost of delivery.A consultant has analyzed the delivery service using activity-based costing methods and identified four activities.Data on these activities are:
 $$\begin{array} { | l | l | r | l | } 
\hline \text { Activity } & \text { Cost Driver } & \text { Cost } & \begin{array} { l } 
\text { Driver } \
\text { Volume }
\end{array} \
\hline \text { Process order } & \begin{array} { l } 
\text { number of } \
\text { orders }
\end{array} & \$ 25,000 & \begin{array} { l } 
4,000 \
\text { orders }
\end{array} \
\hline \text { Load truck } & \begin{array} { l } 
\text { number of } \
\text { items }
\end{array} & 50,000 & \begin{array} { l } 
80,000 \
\text { items }
\end{array} \
\hline \begin{array} { l } 
\text { Deliver } \
\text { merchandise }
\end{array} & \begin{array} { l } 
\text { number of } \
\text { orders }
\end{array} & 30,000 & \begin{array} { l } 
4,000 \
\text { orders }
\end{array} \
\hline \text { Process invoice } & \begin{array} { l } 
\text { number of } \
\text { invoices }
\end{array} & 24,000 & \begin{array} { l } 
6,000 \
\text { invoices }
\end{array} \
\hline \text { Total overhead } & & \$ 129,000 &
\end{array}$$ 
Two of Taylor's customers are City Diner and Le Chien Chaud.Below are data on orders and deliveries to these two customers:
$$\begin{array} { | l | r | r | } 
\hline & \text { City Dines } & \text { Le Chien Chaud } \
\hline \text { Order value } & \$ 24,000 & \$ 32,000 \
\hline \text { Number of orders } & 50 & 100 \
\hline \text { Number of items } & 550 & 1,600 \
\hline \begin{array} { l } 
\text { Number of } \
\text { inwoices }
\end{array} & 12 & 120 \
\hline
\end{array}$$ 
Required:
(a)What would be the delivery charge for each customer under the current policy of 4% of order value?
(b)What would the activity-based costing system estimate as the cost of delivering to each customer?

Taylor's Cafe Supply Company Delivers Restaurant Supplies Throughout the City