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 $11 65 per hundred square metres However, there is some question about whether the company is actually making any money on jobs for some customersparticularly those located on more remote properties that require considerable travel time The owners 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 Activity Cost Pool Activity Measure Activity for the Year Snow removal Square metres cleaned (00s) 38,725 hundred square metres Travel to jobs Kilometres driven 17,650 kilometres Jobs Amount of jobs 250 jobs Other (costs of idle capacity and organization sustaining costs) None NA The total cost of operating the company for the year is $427,500, which includes the following costs Wages $ 165,000 Supplies 42,500 Snow removal equipment depreciation 22,500 Vehicle expenses 42,500 Office expenses 65,000 Presidents compensation 90,000 Total cost $ 427,500 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption across Activity Cost Pools Snow Removal Travel to Jobs Job Support Other Total Wages 80 10 0 10 100 Supplies 100 0 0 0 100 Snow removal equipment depreciation 85 0 0 15 100 Vehicle expenses 0 65 0 35 100 Office expenses 0 0 45 55 100 Presidents compensation 0 0 35 65 100 Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on Required 1 Prepare the first stage allocation of costs to the activity cost pools (Do not leave any empty spaces input a 0 wherever it is required ) 2 Compute the activity rates for the activity cost pools (Round your answers to 2 decimal places ) 3 The company recently completed a 4,000 square metre snow removal job at Hometown Hardwarea 80 kilometre round trip journey from Kenoshas offices Compute the cost of this job using the ABC system (Round your answers to 2 decimal places ) 4 The revenue from the Hometown Hardware job was $466 00 (4,000 square metres at $11 65 per hundred square metres) Prepare a report showing the margin from this job (Round your answers to 2 decimal places )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 31, 2024

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

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 $11.65 per hundred square metres. However, there is some question about whether the company is actually making any money on jobs for some customersparticularly those located on more remote properties that require considerable travel time. The owners 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:

Activity Cost Pool	Activity Measure	Activity for the Year
Snow removal	Square metres cleaned (00s)	38,725	hundred square metres
Travel to jobs	Kilometres driven	17,650	kilometres
Jobs	Amount of jobs	250	jobs
Other (costs of idle capacity and organization-sustaining costs)	None	NA

The total cost of operating the company for the year is $427,500, which includes the following costs:


Wages	$	165,000
Supplies		42,500
Snow removal equipment depreciation		22,500
Vehicle expenses		42,500
Office expenses		65,000
Presidents compensation		90,000
Total cost	$	427,500

Resource consumption is distributed across the activities as follows:

	Distribution of Resource Consumption across Activity Cost Pools
	Snow Removal			Travel to Jobs			Job Support			Other			Total
Wages		80	%		10	%		0	%		10	%		100	%
Supplies		100	%		0	%		0	%		0	%		100	%
Snow removal equipment depreciation		85	%		0	%		0	%		15	%		100	%
Vehicle expenses		0	%		65	%		0	%		35	%		100	%
Office expenses		0	%		0	%		45	%		55	%		100	%
Presidents compensation		0	%		0	%		35	%		65	%		100	%

Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on.

Required:

1. Prepare the first-stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.)

2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

3. The company recently completed a 4,000-square-metre snow removal job at Hometown Hardwarea 80-kilometre round-trip journey from Kenoshas offices. Compute the cost of this job using the ABC system. (Round your answers to 2 decimal places.)

4. The revenue from the Hometown Hardware job was $466.00 (4,000 square metres at $11.65 per hundred square metres). Prepare a report showing the margin from this job. (Round your answers to 2 decimal places.)