Ginas jeans business uses a costing system for all customers who get a custom jeans made. The business uses a pre-determined indirect cost rate for allocating indirect costs/overheads to individual customers, with operating hours used as the cost driver. In August, the business had a budgeted allocation base of 500 operating hours. The budgeted business indirect overhead costs for August were $23,000. Customer Georg wanted to acquire a new custom jeans and visited the store for three hours during August. Other direct costs related to the three-hour session include $34 for the used materials, 30$/hour for labour, and $10 for other supplies.

Required:

1. Calculate the pre-determined indirect cost rate (PICR) the business used for August. (4 marks)

2. Calculate the total cost to the business for these sessions. (6 marks)

3. Assume the business applies a cost-based pricing model to set prices to customers, adding a mark-up of 25%. What price should Ginas jeans business charge Georg for his session and jeans? Explain your answer. (4 marks)

4. Volume-based cost drivers are no longer appropriate in todays business environment.

Is this statement true? Discuss and explain why you agree/disagree with this statement. (6 marks)