Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

knosha 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

knosha 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 $10.00 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 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 Activity Measure Activity for the Year
Snow removal Square metres cleaned (00s) 53,000 hundred square metres
Travel to jobs Kilometres driven 29,660 kilometres
Job support Number 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 $517,500, which includes the following costs:

Wages $ 201,000
Supplies 48,500
Snow removal equipment depreciation 28,500
Vehicle expenses 48,500
Office expenses 77,000
President's compensation 114,000
Total cost $ 517,500

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 70 % 20 % 0 % 10 % 100 %
Supplies 100 % 0 % 0 % 0 % 100 %
Snow removal equipment depreciation 80 % 0 % 0 % 20 % 100 %
Vehicle expenses 0 % 70 % 0 % 30 % 100 %
Office expenses 0 % 0 % 40 % 60 % 100 %
President's compensation 0 % 0 % 45 % 55 % 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.)

Snow Removal Travel to Jobs Job Support Other Total
Wages $0 $0 $0 $0 $0
Supplies 0 0 0 0 0
Snow removal equipment depr. 0 0 0 0 0
Vehicle expenses 0 0 0 0 0
Office expenses 0 0 0 0 0
President's compensation 0 0 0 0 0
Total cost $0 $0 $0 $0 $0

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

Activity Cost Pool Activity Rate
Snow removal - per hundred square metres
Travel to jobs - per kilometre
Job support - per job

3.The company recently completed a 5,200-square-metre snow removal job at Hometown Hardwarea 92-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.)

3.The company recently completed a 5,200-square-metre snow removal job at Hometown Hardwarea 92-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 $0.00

4.The revenue from the Hometown Hardware job was $520.00 (5,200 square metres at $10.00 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 - 0.00
Product margin $0.00

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Detecting Accounting Fraud Analysis And Ethics

Authors: Cecil Jackson

1st Edition

0133078604, 9780133078602

More Books

Students also viewed these Accounting questions

Question

1. To take in the necessary information,

Answered: 1 week ago