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Kenosha Winter Services operates a seasonal snow removal service. The company has a continuous improvement process. This year they decided to do an Activity-Based costing
Kenosha Winter Services operates a seasonal snow removal service. The company has a continuous improvement process. This year they decided to do an Activity-Based costing review of their service. They have identified the following activity related information for job overhead costs: Activity Cost Pools Snow removal Activity Measure Square meters Kilometers Jobs Expected Activity Levels 3,000,000 15,000 200 Calculated Overheads $ 189,000 38,250 35,000 Travel to jobs Job support Required: 1. Compute the ABC activity rates. Round to 3 decimal places. 2. The company charges $0.15 per square meter for snow clearing. The average job is 10,000 square meters and 40 kilometers round trip. What is the margin on an average job? 3. The company recently completed a snow removal job for a new customer. Size of area cleared: 4,000 square meters Round trip to and from job: 75 Kilometers Compute the cost and margin on this job. 4. What can you conclude about the profitability of the new customer relative to the average customer? 5. What are two key factors Kenosha should pay attention to when contracting and setting prices with new customers
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