Accountant Junk Removal (AJR) has been in business for years.Due to recent poor results, AJR feel that that certain customers are more profitable than other customers are.AJR would like to know what type of customers they should be looking for to help to improve its profit.

Customer 1 Customer 2 Customer 3 Customer 4 ACCT 2011 - Case (worth 5% of mark) Ibs Removed 10,000 100,000 75,000 15,000 5 40 10 25 Accountant Junk Removal (AJR) has been in business for years. Due to recent poor results, AJR feel that Number of Jobs that certain customers are more profitable than other customers are. AJR would like to know what type of customers they should be looking for to help to improve its profit. (d) Calculate the profit and profit % for each customer. (e) Based on the information from part (d), comment on the type of customers that AJR should be It was decided that AJR adopt an Activity Based Costing method to help it better understand the costs looking for to increase its profit. associated with its revenue. (f) What is an area of its business that AJR could focus on to improve its amount of profit (dollars not percentage)? The following information was collected based on a study performed by AJR: Activity Cost Pool Activity Measure Total Activity Junk Removal Per lbs 500,000 Job Setup Number of jobs 200 Scheduling Per Customer 25 Other Not Applicable Distribution Across Activity Pools Junk Removal Job Setup Scheduling Other Junk Disposal 70% 0% 30% 0% Insurance 40% 10% 40% 10% Wages 40% 10% 35% 15% General Admin 0% 50% 30% 20% Depreciation 40% 10% 40% 10% On-site Supplies 50% 20% 20% 10%% AJRs Budget is as follows: Junk Disposal 600,000 Insurance 370,000 Wages 200,000 General Admin 168,000 Depreciation 80,000 On-site Supplies 60,000 Total Costs 1,478,000 AJR charges $2.50 per Ibs removed. Required: (a) Prepare a report to show allocation of costs to the Activity Cost Pools. (b) Compute the Active Rate for each Activity Cost Pool. (c) The details of 4 different customers are below. Calculate the costs of each customer using the Activity rates from part (b)