ACTIVITY BASED COSTING

Activity Based Costing Case: The New Millennium Linen Company

Activity Based Costing Case: The New Millennium Linen Company

Requirement 1

(a) As reported in the company's income statement, total selling and distribution costs are $180,000 and the total company revenue is $500,000. Using a traditional cost allocation, below are the distributed costs per activity:

Cost allocated to the Department Store activity using the activity revenue multiplied by the selling and distribution costs ratio is $54,000 ($180,000/$500,000=.36 x $150,000=$54,000)

Cost allocated to Specialty Shop activity using the activity revenue multiplied by the selling and distribution costs ratio is $36,000 (.36.x $100,000=$36,000)

Cost ...