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Optimum Health Inc. provides diet, fitness, and nutrition services to clients who want a healthier lifestyle. The company customizes a program for each client based
Optimum Health Inc. provides diet, fitness, and nutrition services to clients who want a healthier lifestyle. The company customizes a program for each client based on their individual goals that includes diet recommendations (prepackaged food and supplements), nutrition counseling, and guided fitness (personal training). The company uses a modified job order cost system that keeps track of the cost of the food, vitamins, and nutritional supplements the company provides to each client, as well as the amount of time nutrition and fitness consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and management salaries) as a percentage of the consultants labor cost. During the most recent year, the firm estimated that it would pay $190,000 to its consultants and incur indirect operating costs of $285,000. Actual consultant labor costs were $205,000 and actual indirect operating costs were $275,000. The cost records for three of Optimum's clients are summarized below Judy Food and nutritional supplements Nutritional counseling ($16 per hour) Personal fitness training ($21 per hour) Indirect operating costs S 400 1,200 200 192 840 160 420 320 630 Required 1. Compute the predetermined overhead rate. 2. Determine the total cost of serving each client. Judy Tom Elizabeth Total Cost of Serving
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