Allied Office Product Case Study

Question 1
Activity Based Service Cost for the TFC business Activity | Total Activity Cost ('000) | Activity Driver | Usage | Actual Cost | Storage | $ 1,550 | Number of Cartons | 350,000 | $ 4.43 | Requisition Handling | $ 1,801 | Number of Requisition | 310,000 | $ 5.81 | Basic Warehouse stock selection | $ 761 | Number of Requisition × 2.5 lines | 775,000 | $ 0.98 | "Pick-pack" activity | $ 734 | (Number of Requisition × 2.5) 90% | 697,500 | $ 1.05 | Data Entry | $ 612 | Number of Requisition × 2.5 lines | 775,000 | $ 0.79 | Desk top delivery | $ 250 | Number of Desk Top request | 8,500 | $ 29.41 | Total | $ 5,708 | | | $ 42.47 |

Question 2
Distribution Service Cost for Customer A and B Activity | | Customer A | | Customer B | Storage | 350 Cartons × $4.43 | $ 1,550.50 | 700 Cartons × 4.43 | $ 3,101.00 | Requisition Handling | 364 Req × $5.81 | $ 2,114.84 | 790 Req × $5.81 | $ 4,589.90 | Warehouse Activity | 910 Lines × $0.98 | $ 891.80 | 2,500 Lines × $1.05 | $ 2,625.00 | Additional "Pick-Pack" Charge | 910 pick-pack lines × $1.05 | $ 955.50 | 2,500 pick-pack lines × $1.05 | $ 2,625.00 | Data Entry | 910 Lines × $0.79 | $ 718.90 | 2,500 Lines × $0.79 | $ 1,975.00 | Desk Top Delivery | 0 times × $29.41 | $ - | 26 times × $29.41 | $ 764.66 | Freight Out (Actual) | - | $ 2,250.00 | - | $ 7,500.00 | Inventory Financing (Estimated WACC of 13%) | $15,000 inventory × 13% | $ 1,950.00 | $50,000 inventory × 13% | $ 6,500.00 | Inactive Inventory Surcharge (A proxy for obsolete inventory cost borne by TFC) | $0 inventory × 1.5% × 3 mths | $ - |