Question

The 10 smaller customers place orders of about equal size. The large customer purchases 1,000,000 units per year by placing 3 orders per year, and the 10 smaller customers order 1,000,000 units in total by placing 400 orders per year. Order filling costs total $886,600 per year. How much would be assigned to the large customer as ordering costs using activity-based customer costs

Answer 1

Answer:

$6,651

Explanation:

Calculation for How much would be assigned to the large customer as ordering costs

First step is to calculate the Total ordering filling cost

Total ordering filling cost = $886,600 per year / 400 orders

Total ordering filling cost = $2,217 per order

Last step is to calculate the Order filling cost allocated to the large customer

Order filling cost allocated to the large customer = $2,217 x 3 order per year

Order filling cost allocated to the large customer= $6,651

Therefore the amount that would be assigned to the large customer as ordering costs will be $6,651