Question 01: STC Inc. is a small family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square meters of snow removal. The current fee is $21 per hundred square meters. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on more remote properties that require considerable travel time. The owner's son, 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 demed (0) 32000 hundred sareers Travel to jobs Klometres driven 15.000 konts Job suport Number of jobs 200 Other (costs of de capacity and organization sustaining costs The total cost for operating the company for the year is $624,000 which includes the following costs: Wages $240,000 Supplies $64,000 Snow removal equipment depreciation $32,000 Vehicle expenses $64,000 Office expenses $96,000 President's compensation $128.000 Total cost $624,000 None Resource composition 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 50% 30% 10% 10% 100% Supplies 75% 25% 10% 0% 100% Snow removal equip. dep. 90% 0% 0% 10% 100% Vehicle expenses 0% 40% 35% 25% 100% Office Expenses 0% 20% 75% 5% 100% President's compensation 10% 90% 100% 0% 0% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. a. Prepare the first-stage allocation of costs to the activity cost pools. [2 Marks] b. Compute the activity rates for the activity cost pools. [2 marks] c. The company recently completed a 3,500-square-metre snow removal job at Downton Hardware-a 60-kilometre round-trip journey from STC's offices. Compute the cost of this job using the ABC system. (2 Marks] d. The revenue from the Downton Hardware job was $735 (3,500 square meters at $21 per hundred square meters). Prepare a report showing the margin from this job. [2 Marks] Question 01: STC Inc. is a small family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square meters of snow removal. The current fee is $21 per hundred square meters. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on more remote properties that require considerable travel time. The owner's son, 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 demed (0) 32000 hundred sareers Travel to jobs Klometres driven 15.000 konts Job suport Number of jobs 200 Other (costs of de capacity and organization sustaining costs The total cost for operating the company for the year is $624,000 which includes the following costs: Wages $240,000 Supplies $64,000 Snow removal equipment depreciation $32,000 Vehicle expenses $64,000 Office expenses $96,000 President's compensation $128.000 Total cost $624,000 None Resource composition 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 50% 30% 10% 10% 100% Supplies 75% 25% 10% 0% 100% Snow removal equip. dep. 90% 0% 0% 10% 100% Vehicle expenses 0% 40% 35% 25% 100% Office Expenses 0% 20% 75% 5% 100% President's compensation 10% 90% 100% 0% 0% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. a. Prepare the first-stage allocation of costs to the activity cost pools. [2 Marks] b. Compute the activity rates for the activity cost pools. [2 marks] c. The company recently completed a 3,500-square-metre snow removal job at Downton Hardware-a 60-kilometre round-trip journey from STC's offices. Compute the cost of this job using the ABC system. (2 Marks] d. The revenue from the Downton Hardware job was $735 (3,500 square meters at $21 per hundred square meters). Prepare a report showing the margin from this job. [2 Marks]
