What is cost that will be allocated from accounts receivable

Assignment Help Cost Accounting

Reference no: EM131884720

Problem

John's Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for all customers is handled by the corporate Accounts Receivable Department. Accounts Receivable performs two major activities: billing and dispute resolution. Billing refers to preparing and sending the bills as well as processing the payments. Dispute resolution occurs when a customer refuses to pay, usually due to an error in billing.

The costs of the Accounts Receivable Department are allocated to the two divisions based on the number of bills prepared. Kyle, the manager of the business division, has complained that the allocated costs from Accounts Receivable are beginning to make the business division look unprofitable and has asked you to recommend some changes to the allocation system. If he agrees with your recommendation, he will pass them on to the chief financial officer.

Data on costs and activities in the Accounts Receivable Department follow:

	Personal	Business	Total
Number of bills prepared	600	350	950
Number of disputes	60	10	70

The Accounts Receivable department incurred the following costs during the year:

Billing    $ 42,750
Dispute resolution     38,500
Total                     $ 81,250

Required:

a. Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business? (Do not round intermediate calculations.)

b. Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for billing costs and the number of disputes for dispute resolution costs.

Reference no: EM131884720

Questions Cloud

What will the terms of the swap be : A company that has an existing 4-year, $50 million loan with annual coupon payments of LIBOR + 3.5% would like to enter into a swap agreement.

What is the dirty price of the bond : What is the dirty price of the bond assuming that the most recent interest payment was on 11/25/16 in the amount of $37.50.

Computing sales growth and operating expense growth : Using the consolidated statements of operations, analyze the profitablity of Intel by preparing a common-size income statement for the past three years.

Calculate the realized rate of return earned on this bond : It also paid $400 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond

What is cost that will be allocated from accounts receivable : Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business?

Define and discuss about the investments : List the various classifications of investments when an investor lacks significant influence.

What is the amount of andrew recognized gain : In 2013, Andrew, Jonas, and Devin form Greek Corporation. Andrew contributes land (a capital asset) having a $100,000 FMV in exchange for 145 shares of Greek.

What is the balance on the ram at the time loan due : What is the balance on the RAM at the time when this loan becomes due? Round your answer to the nearest cent.

What are the days receivables for this company : A Company Has A Cash Turnover Of 8.11, Days' Inventory Of 60 Days And Days' Payables Of 55 Days. What Are The Days' Receivables For This Company?

User Account

All Pages