Jenny runs a bushwalking company. She runs two types of walking tours - an easy tour lasting 3 days and an advanced 5 day tour.

Jenny has provided you with the following breakdown of her projected overhead costs and activities associated with all the tours to take place in 2020.

She also provided you with the following activity breakdown of each of these two types of tours

In the past, Jenny has followed the traditional method with one pre-determined overhead rate based on the number of tours to be undertaken.

QUESTIONS

i) Calculate the total projected overhead for all tours. Show all calculations.

ii) Calculate the predetermined overhead rate under the traditional method used by Lance, based on the number of tours to be undertaken. Show all calculations.

iii) Calculate the overhead cost of each type of tour (Easy and Advanced) using the traditional method. Show all calculations.

iv) Calculate the overhead cost of each tour (Easy and Advanced) using the activity drivers and associated activity costs. Show all calculations.

v) Discuss in detail the conclusions you reached regarding the overhead costs for each type of tour for each cost allocation method.

Activity Activity Driver Total Overhead ($) Advertising Use of Bikes Guides Number of tours Number of people Total distance ridden (kms) 2,000 17,500 45,000 Number of Activity Drivers 200 1,750 9,000 Easy Tour Advanced Tour Number of tours Number of people per tour Number of days per tour Distance ridden per tour(km) 150 10 3 20 50 5 5 120