Reference no: EM132818537
Problem - Process costing: book order agency
All Texts and Stationery Ltd (ATS) Is a major provider of texts and stationery to secondary schools throughout South Australia. Students submit their order to ATS through their school at the beginning of the year. All Texts and Stationery fills the order in three stages:
(a) An order is received from the school and entered into the ATS Inventory order system.
(b) The books and stationery required to fill the order are taken from inventory, packed and dispatched to the student.
(c) Payment Is received from the student and processed.
The costs of these three processes in the year just ended are listed below.
|
Cost
|
Receipt of order
|
Packing and dispatch of order
|
Receipt of payment
|
|
Staff salaries
|
$60,000
|
$150,000
|
$72,000
|
|
Equipment depreciation
|
504,000
|
174,000
|
288,000
|
|
Equipment insurance
|
96,000
|
66,000
|
96,000
|
|
Telephone
|
4,800
|
3,600
|
2,400
|
|
Data processing
|
9,000
|
2,400
|
14,400
|
|
Postage
|
-
|
186,000
|
-
|
|
Consumables
|
3,600
|
42,000
|
2,400
|
During the year, ATS processed 22,000 student orders.
Required -
1. Calculate the cost per order for each process.
2. Calculate the total cost per order.
3. Why wouldn't the total cost per order provide a reliable estimate of the costs incurred to process each order? Explain your answer by outlining factors that may affect the cost of an individual order.