Get Up ’n Go Fitness Club is an exercise club that offers four basic products: weight training, supervised fitness routines, aerobics, and swimming. It currently charges the firm’s $1,500,000 labor and overhead combined out on hours of operation. Sam Gentry, the firm’s owner, has recently been approached by a student team from a local university to do an activity-based cost analysis of the operation. Sam agrees, figuring any thing he can do to settle some ongoing struggles between his operating managers is worth a try. The students compile the following information for you.

REQUIRED:

a. Calculate Sam’s current overhead rate per hour of operation.

b. Using hours of operation as your driver, calculate how much overhead is currently being charged to each of the product lines.

c. Calculate your activity rates for each of the ABC drivers noted.

d. Charge out overhead to product lines, using the ABC rates.

e. Calculate total overhead by product line.

f. Calculate overhead by hours of operation for each of the product lines.

g. What does this information tell you? What specific recommendations would you make to Sam regarding Get Up ’n Go Fitness Club?

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Get Up 'n Go Fitness Club Activity Number Driver Dollars Personal training 2,000 Trainer hours $80,000 Weight training 20,000 Bench hours $100,000 Circuit training 40,000 Nachine hours $1,000,000 Aerobics 1,000 lasses taught $50,000 Swimming 6,000 Hours of operation $120,000 Miscellaneous 8,000 Direct labor hours $150,000 TOTAL $1,500,000