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Kenosha Winter Services is a small, family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square metres
Kenosha Winter Services is a small, family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square metres of snow removal. The current fee is $12.70 per hundred square metres. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on more remote properties that require considerable travel time. The owner's daughter, home from school for the summer, has suggested investigating this question using ABC. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below: Chec Activity Cost Pool Snow removal Travel to jobs Activity Measure Square metres cleaned (00s) Kilometres driven Job support Number of jobs Other (costs of idle capacity and organization-sustaining costs) None Activity for the Year 43,600 hundred square metres 25,350 kilometres 200 jobs NA The total cost of operating the company for the year is $532,500, which includes the following costs: Wages Supplies Snow removal equipment depreciation Vehicle expenses office expenses President's compensation. Total cost $207,000 49,500 29,500 49,500 79,000 118,000 $532,500
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