Notes: 1. Analysts receive a flat salary of $52,000 per year, which averages $25 per hour. Their time and cost are traced to individual jobs. Analysts are rarely idle, and the company can adjust staff volumes to the level of work on hand. 2 Sales representatives locate clients, sell sport research services, negotiate the price for each job and coordinate the work with analyst(s). Sales representatives receive commissions based on 40% of the pre-tax profit for their jobs (see Appendix I). 3. Online survey conductars work as needed to launch surveys. They are paid $15 per hour and trace their time to individual jobs. Sixty (60) surveys were completed in the year. 4. The supervisor manages the work of the survey conductors and is paid a flat salary. 5. Payroll taxes and employee benefits average 30% of salaries and wages. 6. Telephone internet costs include approximately $5,000 per year for basic local and long- distance telephone services for the office, plus approximately $54,000 per year for the online survey centre. 7. Rent, heat and lights are for the entire office space. Approximately 30% of the space is used by analysts, 50% by the online survey centre and 20% by general administration. The online survey centre space could easily be subleased to another company in the same building that would like to expand at the same rate. 8. Of the depreciation for office furniture and equipment, approximately 30% relates to the analysts, 40% to the online survey centre, and 30% to general administration. Assets used by the online survey centre could be sold for $1,000. 9. Miscellaneous office expenses include items such as office supplies, insurance, etc. Overhead costs include all costs that are not traced directly to jobs. Overhead is allocated to jobs based on number of analyst hours, using a predetermined rate based on the annual budget ($70 per hour for the current year). Long Shot Consulting Ltd Ruby Long is the president and owner of Long Shot Consulting Ltd. (LSCL), a professional sports research company. The company provides various statistical research services including analysis of viewer preferences, comparison of merchandise products with team/sport preferences and collection of survey data using online platforms. The company's mission statement is as follows: We provide leading-edge professional sports research and analysis to enable our clients to compete more effectively. You have recently been hired as the company's financial consultant and met with Ruby to review her concerns. Ruby is concerned that the company's profit is no longer growing. She notes that some of the jobs, like the small research contracts, are losing money. She would like to refocus the company efforts on jobs that provide more profit (Appendix 1). Her best friend runs an engineering firm and tells her that activity-based costing (ABC) helped her company focus on the most profitable clients. She wonders if that would be a good fit for LSCL. Lastly, one of the company's sales representatives recently complained to Ruby about how his sales commissions are calculated. The sales representative argued that his sales commissions are penalized because overhead is allocated based on analyst hours only. He believes that sales representatives who bring in jobs involving collection of survey data receive commissions that are too high because their jobs require fewer analyst hours, hence bear too little overhead cost. Ruby would like you to evaluate the design of the job costing system. The current year's budgeted costs and overhead allocation are provided in Appendix IIL Ignore any possible income tax effects. 1. Based on your strong accounting acumen developed in BFIN 244, what is wrong with the current job costing system. 2. Consider and determine how an ABC systern would work for LSCL by completing the following: a. Revise Appendix III in light of implementing an ABC system b. Identify the Activity Cost Pools c. Identify the Activity Cost drivers for each of the pools you identify in 2b d. Create the ABC costing system for LSCL 3. Analyze the results above and discuss the potential impacts of using an ABC system. 4. Based on your ABC results versus the prior job costing system, what information did ABC provide that would allow for better decision making?