P18-30: ABC Costing for a Service Organization...

ABC Costing for a Service Organization Lo2, 3, 4) Fairfield Mortgage Company is a full-service residential mortgage company in the Atlanta area that ( x:raies vexy ("ADEupei.tveg Kual EC 1 CI iORic tard Sissom, lS (:4MKXXXKxl aIxput o(Xxatung c( sis associated with processing mortgage applications and has decided to install an ABC costing system to help him get a handle on costs. Although labor hours seem to be the primary driver of the cost of processing a new mortgage, the labor cost for the different activities involved in processing new loans varies widely. The Accounting Department has provided the following data for the company's five major cost pools for 2014: O. Richard Sissom, is concemed about operating costs Activity Cost Pools Activity Drivers s 300,000 Time-assistant manage13,000 hours Time-Underwriting Department . . 525,000 . Closing loans . . .. . .. . .. . . . . .. . 600,000 Tme-Legal Department hours... 6,000 hours 52,500 hours $2,175,000