Question
2. A painter allocates overhead to clients using activity-based costing. One activity identified as overhead is the painter's subscription expense, which is estimated to total
2. A painter allocates overhead to clients using activity-based costing. One activity identified as overhead is the painter's subscription expense, which is estimated to total $400 for the upcoming month and will be allocated based on the number of clients. Another activity is the indirect supplies expenses, which are estimated to total $750 in the upcoming month and are allocated based on number of rooms painted. The company expects to service 20 clients and paint 60 rooms.
a. Calculate the activity rate for the painter's subscription expense and indirect supplies expenses.
b. The company will paint 3 rooms for Tom Jones and 2 rooms for Ellie Libertino. Calculate the overhead related to these activities the company should allocate to each client.
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