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question brent company 39 s cost system assigns msda expenses to customersusing a ra 4286803

Question

Brent Company's cost system assigns MSDA expenses to customersusing a rate of 33% of sales revenue. The new CFO has discoveredthat Brent's customers differ greatly in their ordering patternsand interaction with Brent's sales force. Because the CFO believesBrent's cost system does not accurately assign MSDA expenses tocustomers, he developed an ABC system and gathered the followinginformation.

 

Austin

Brooke

Totals

Sales

$ 860,000

$ 700,000

$ 1,560,000

Cost of Goods Sold

440,000

310,000

750,000

Sales Representative Travel 1

8,000

84,000

92,000

Service Customers

30,000

220,000

250,000

Handle Customer Orders

2,000

24,000

26,000

Ship to Customers

48,000

144,000

192,000

Using the activity-based costing information provided, determinethe operating profit associated with Austin and with Brooke.

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