Question
A local cleaning service has identified 4 activities that drive its costs. The service uses activity-based costing to estimate the costs of jobs prior to
A local cleaning service has identified 4 activities that drive its costs. The service uses activity-based costing to estimate the costs of jobs prior to pricing them. They clean both commercial and residential properties. They have the following budgets for the upcoming year:
Cost Type | Budgeted Cost for Both Commercial & Residential Properties
| Driver | Expected Driver Activity for Commercial Properties | Expected Driver Activity for Residential Properties |
Cleaning Personnel | $120,000 | # of Properties to Clean
| 600 properties to clean | 900 properties to clean |
Travel to Jobs | $30,000 | Miles Driven to/from Property
| 30,000 miles (round-trip) | 10,000 miles (round-trip) |
Cleaning Equipment | $40,000 | Hours to Clean a Property
| 24,000 hours | 16,000 hours |
Cleaning Supplies | $60,000 | Square Feet of Property | 360,000 square feet | 240,000 square feet |
A residential customer has called and would like price quote to have his property cleaned next week. The property is a 20 mile round-trip to/from the cleaning personnel. It should take about 4 hours to clean it and the house is 1,000 square feet.
What would you recommend the price quote be to this customer? Support your answer with clear calculations of your cost estimate and about your pricing strategy.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started