Question
Brookside Property Management is a property management service company for small shopping malls that uses ABC to estimate costs for pricing and other purposes. The
Brookside Property Management is a property management service company for small shopping malls that uses ABC to estimate costs for pricing and other purposes. The owner of the company believes that costs are driven primarily by the area of outdoor maintenance (parking lots, sidewalks, and gardens), the area of indoor tenant space in the shopping mall, the distance to travel to the shopping mall, and the number of shopping malls managed. In addition, the costs of managing the indoor tenant space depend on whether the tenants are located on the main level or other levels of the mall. Accordingly, the company uses the five activity cost pools listed below:
Activity Cost Pool | Activity Measure |
Management of outdoor areas | Square metres of outdoor areas |
Management of indoor mall spacemain level | Square metres of main level mall space |
Management of indoor mall spaceother levels | Square metres of nonmain level mall space |
Travel to jobs | Kilometres |
Customer billing and service | Number of shopping malls |
The company has already carried out its first-stage allocations of costs. The companys annual costs and activities are summarized as follows:
Activity Cost Pool | Estimated Overhead Cost | Expected Activity | ||||
Management of outdoor areas | $ | 69,850 | 127,000 | square metres of outdoor areas | ||
Management of indoor mall spacemain level | $ | 114,400 | 104,000 | square metres of main level mall space | ||
Management of indoor mall spaceother levels | $ | 307,500 | 246,000 | square metres of nonmain level mall space | ||
Travel to jobs | $ | 6,600 | 22,000 | kilometres | ||
Customer billing and service | $ | 13,800 | 8 | shopping malls | ||
Parker Hills Shopping Mall is one of Brooksides oldest clients. Details concerning the malls layout, outdoor space, and distance from Brooksides head office are as follows:
Activity Cost Pool | Total Activity for Parker Hills Mall | |
Management of outdoor areas | 16,000 | square metres of outdoor areas |
Management of indoor mall spacemain level | 25,000 | square metres of main level mall space |
Management of indoor mall spaceother levels | 0 | as mall only has one level |
Travel to jobs | 2,500 | kilometres travelled |
Customer billing and service | 1 | shopping malls |
Required:
1. Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)
2. Determine the total overhead cost that would be assigned to the Parker Hills Shopping Mall using the ABC system. (Round your answers to 2 decimal places.)
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