Transcribed Image Text: 2. Sunshine Company sells custom made surf boards in California. The finance manager has supplied the following data from its activity-based costing system: Overhead Costs Staff Salaries

Transcribed Image Text: 2. Sunshine Company sells custom made surf boards in California. The finance manager has supplied
the following data from its activity-based costing system:
Overhead Costs
Staff Salaries
$500,000
Selling and administration overheads
200,000
Total Overhead Costs
$700,000
Activity Cost Pool
Product design
Order Processing
Customer Support
Activity Measure
Number of new designs
Number of Customer orders
Number of Customers
Organization sustaining activity
Total Activity for the Year
500 new designs
700 orders
400 customers
Not applicable
Others
Distribution of Resource Consumption across Activities
Product
Order
Customer
Other
Total
Design
Processing
Support
Staff Salaries
40%
30%
20%
10%
100%
Selling and
30%
10%
20%
40%
100%
administration
overheads
During the year Sunshine Company completed three individual orders for a new customer, Tarpaper
Inc. Two different designs of surfboards were prepared for and sold to this new customer – Orange
Tangerine and Blue Waves. Data concerning the two designs and customer orders are as follows:
Orange Tangerine
$700 per unit
$280 per unit
$100 per unit
Blue Waves
Selling price
$500 per unit
$180 per unit
$50 per unit
Direct materials
Direct labor
Order 1
10 units of Orange Tangerine
Order 2
20 units of Blue Waves
Order 3
15 units of Orange Tangerines and 15 units of Blue Waves Transcribed Image Text: Required:
a. Prepare a report showing the first-stage allocation of overhead costs to the respective activity cost
pools.
b. Calculate the activity rates for the activity cost pools.
c. Prepare a report showing the overhead costs for the orders from Tarpaper Inc. including customer
support costs.
d. Prepare a report showing the customer margin for Tarpaper Inc. is the usefulness of finding the
customer margin?

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