Mehil owns a taxi business in Newcastle. He recently expanded his business by including limousines.

Mehils accountant has provided the following information on monthly revenues and costs:

The taxi division has monthly revenues of $3,475,000

The Limousine division generates revenues of $375,000.

Expenses of $2,656,750 were allocated to divisions based on the number of kilometres travelled.

Mehil has heard about Activity Based Costing and wants to know what benefits it could provide, so he has obtained the following monthly information on expenses for NSW:

	Taxis	Limousines
Bookings	44,000	1,500
Kilometres	1,200,000	150,000
Driver hours	67,500	10,000

Mehil has identified that the main activity cost areas include salaries, vehicle costs and booking fees.

Salaries	$1,360,000
Booking fees	$22,750
Fuel	$1,193,000
Call centre booking fees	$45,500
Vehicle maintenance	$35,500

Complete the following activities:

1. Identify the appropriate cost pools and calculate the appropriate driver rates for the activities listed above.

You may wish to use the following table in your answer

Ans.

Cost pool	Cost	Driver	Driver unit	Driver rate
Booking Cost Fuel	$68,250	No of Booking	45,500	1.50
Payroll cost Fuel	$1,360,000	No of Hours	77,500	17.55
Motor Vehicle Cost Fuel	$1,228,500	No of Kilometres	1,350,000	0.91

2. Using ABC costing, prepare a product line profitability report.

Show all workings in your answer and ensure you have reconciled data to ensure accuracy of calculations.