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available until you The BIG Energy Company provides Gas and Electricity to both residential and commercial customers. Their billing department provides account inquiry and bill
available until you The BIG Energy Company provides Gas and Electricity to both residential and commercial customers. Their billing department provides account inquiry and bill printing services for the two major classes of customers residential (500,000 accounts) and commercial (7,500 accounts). All costs in the department have been classified as indirect to each customer account. Until recently, these indirect costs have been allocated equally to each account, irrespective of type (residential vs commercial). Consider the below indirect costs (per year); Item Cost ($) Labour supervisors 100,000 Labour account inquiry 375,000 Labour - billing 180,000 Building occupancy 50,000 Telecommunications 30,000 Computer 95,000 Printing machines 120,000 Paper 14.000 The company has recently decided to adopt ABC and has split reclassified its indirect costs in the table above into the following Activities: The company has recently decided to adopt ABC and has split / reclassified its indirect costs in the table above into the following Activities: Activity Cost ($) Activity cost drivers Total count of activity cost driver units - Residential Total count of activity cost driver units - Commercial Account inquiry 400,000 Number of lines 900,000 100,000 Number of Correspondence 125,000 0 7,500 accounts Number of labour Account billing 254,000 6,000 1,000 hours 9,000 Bill verification FILL 1 Number of letters 10,000 The indirect cost per Commercial Client under Activity Based Costing is FILL 2 O FILL 1 - 75,000; FILL 2 - $32.89 O FILL 1 - 75,000; FILL 2 - $31.57 O FILL 1 - 100.000; FILL 2 - $31.57 O FILL 1 - 100,000; FILL 2 - $32.89
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