Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 $12.75 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. Activity Cost Pool Snow renoval Travel to jobs Activity Measure Square metres cleaned (ees) Kilometres driven Job support Number of jobs Other (costs of idle capacity and organization-sustaining costs) None Activity for the Year 32,000 hundred square metres 15,000 kilometres NA 400 jobs The total cost of operating the company for the year is $390,000, which includes the following costs: Wages $150,000 Supplies 40,000 Snow removal equipment depreciation 20,000 Vehicle expenses 40,000 Office expenses 60,000 President's compensation 80,000 Total cost $390,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption across Activity Cost Pools Snow Travel to Job Removal Jobs Support Other Total Wages 80% 100% ex 10x 100% Supplies 100x ex ex 100% Snow removal equipment depreciation 80% ex 20% 100% Vehicle expenses eas 60% 0% 40% 100x Office expenses ens ens 45% 55% 100% President's compensation eas ens 40% 60% 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 O wherever it is required.) Wages Supplies Snow removal equipment depr Vehicle expenses Office expenses President's compensation Total cost Snow Removal Travel to Jobe Job Support Other Total 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) Activity Cost Pool Snow removal Travel to jobs Job support Activity Rate per hundred square metres per kilometro per job 3. The company recently completed a 3,500-square-metre snow removal job at Hometown Hardware-a 75-kilometre round-trip journey from Kenosha's offices. Compute the cost of this job using the ABC system. (Round your answers to 2 decimal places.) Activity Cost Pool ABC Cost Snow removal Travel to jobs Job support Total 4. The revenue from the Hometown Hardware job was $446.25 (3,500 square metres at $12.75 per hundred square metres). Prepare a report showing the margin from this job. (Round your answers to 2 decimal places.) Sales Costs Snow removal Travel to jobs Job support Product margin
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started