Exploding Diapers,Inc is a daycare company in NYC.The company has expanded and now has 3centers.Center 1's Income Statement showed the following:

Revenue $240,000

Direct Expenses 195,200

OH 50,000

Operating Income (Loss) $(5,200)

The company's overhead for the year included the salary of the owner,Jihyo($90,000), and advertising ($60,000), and was allocated using a peanut-butter spread across all 3centers so that each was allocated $50,000.

Jihyospends her time overseeing the operations of all three centers and handling all paperwork (e.g., billing), and wants to reallocate the existing overhead costs to centers using recently collected information with respect to key activities and activity cost drivers. The estimated activity-based cost and driver data, which in the future will be collected automatically via a new software package using a commercially available product tailored to daycare providers, is presented below:

Overhead Activity Cost Pools	Total Activity Costs	Allocation base
Account Maintenance (e.g., billing)	$36,000	Number of preschool children
Meeting with parents	18,000	Number of parent meetings
Facilities maintenance (calling repairmen, etc.)	22,500	Maintenance costs
Overseeing operations	13,500	Spread evenly across centers
Gretchen's total salary	$90,000
Advertising	60,000	Number of advertising promotions

Activity Consumption by Center	Center 1	Center 2	Center 3	Estimated Activity Total	Estimated Practical Capacity
Number of preschool children	48	60	90	198	225
Number of parent meetings	48	60	350	458	480
Maintenance costs	5,000	4,000	2,000	11,000	11,250
Number of advertising promotions	6	6	20	32	32

Compute the revised operating income for Center 1 using "best practices" under the activity-based-costing method proposed by Jihyo. (ROUND to 2 decimal places in all calculations and enter your answer rounded to the nearest dollar. For example, if you believe the answer is "$25,347.69", enter "$25,348".)

Answer rating: 100% (QA)

Answer To compute the revised operating income for Center 1 using activitybased costing we need to a... View the full answer