Choice Hotels Sales, Production, and Cost Information
Room Type	Standard Guest Room	Junior Suite	Presidential Suite
Volume	150	110	25
Price	$140,000	$240,000	$1,050,000
Unit costs
Direct materials	$30,000	$92,000	$310,000
Direct labor	$54,000	$85,000	$640,000
Manufacturing	$30,000	$30,000	$30,000
overhead
Total unit cost	$114,000	$207,000	$980,000
Unit gross profit	$26,000	$33,000	$70,000
Direct labor hours	1,200	1,300	5,940
Rate per hour	$45.00	$65.38	$107.74

4. Use activity-based costing to allocate the costs of overhead per unit and in total to each guest room type. Show all supporting calculations in the space provided.

5. Calculate the cost of one Presidential Suite using activity-based costing.

6. Why are the costs different between the traditional method and the activity-based method?

Choice Hotels controller developed the following data for use in activity-based costing:

Manufacturing overhead

Amount

Cost driver

Standard Guest Room

Junior Suite

Presidential Suite

Depreciation

$3,200,000

Square feet

50,000

30,000

30,000

Maintenance

$1,800,000

Direct labor hours

180,000

143,000

148,500

Purchasing

$320,000

# of purchase orders

2,500

1,500

9,000

Inspection

$850,000

# of inspections

1,000

850

3,500

Indirect

$490,000

Units manufactured

150

110

25

materials

Supervision

$1,700,000

# of inspections

1,000

850

3.5

Supplies

$190,000

Units manufactured

150

110

25

Total

$8,550,000