Question 1

Each barbecue is sold for $5.00, and each balloon is sold for $2.00. Throughout the two weekend days, the four friends were able to sell 300 barbecues and 170 balloons. The four friends did not have to bother about the stock of sausage and bread or balloons; they arranged with a supplier and had to pay only $0.25 per barbecue served (a slice of bread and a sausage) and $0.07 for each balloon. For the sake of remuneration, the friends have agreed that each one would receive $200 for the two days of hard work as labour cost. Besides the costs of labour and material, the four friends had other costs for the two days. For the sake of simplicity, two costs were related to the production process, which were leasing a BBQ ($400) and a balloon pump ($50) during the weekend. The other two costs were related to sales and administrative tasks, which were leasing a gazebo ($100) and getting a permit for having the stand outside the shopping centre ($250) during the weekend.

a) Based only on the information provided above, prepare a contribution format income statement for BBQ & Balloons.

Agnetha and Bjrn spent most of their time preparing the barbecues or inflating balloons, whereas Benny and Anni-Frid were busy with sales and administrative tasks. The table below has information regarding the four friends' activities over the weekend concerning labour.

Agnetha spent most of this time during the two days operating the BBQ, Bjrn was mostly busy inflating balloons, Benny was responsible for the cashier, and Anni-Frid spent most of his time greeting and liaising with customers. For calculating an activity rate, the friends have decided to use the following cost drivers; for operating the BBQ the number of barbecues sold, for inflating balloons the number of balloons sold, and for cashier and greeting customers the grand total units of barbecues and balloons sold (total number of transactions).

Required

b) Considering the four cost pool activities (operating the BBQ, inflating balloons, cashier, and greeting customers) prepare a table with the labour cost per activity.

c) Calculate the activity rate for each of the labour cost pool activities and identify which of the four cost pool activities is most expensive and why?

Table 1 - Labour Activity \begin{tabular}{|lccccc|} \hline Person & Operating the BBQ & Inflating balloons & Cashier & Greeting customers & Total \\ Agnetha & ? & ? & ? & ? & $200 \\ Bjrn & ? & ? & ? & ? & $200 \\ Benny & ? & ? & ? & ? & $200 \\ Anni-Frid & ? & ? & ? & ? & $200 \end{tabular} Total ? ? ? ? $800 \begin{tabular}{|lcccc|} \hline Activity Cost Pool & Total Cost & Total Activity & Activity Rate & Activity \\ BBQ & ? & ? & ? & Per barbecue sold \\ Balloons & ? & ? & ? & Per balloon sold \\ Cash transactions & ? & ? & ? & Per transaction \\ Customers greeted & ? & ? & ? & Per transaction \\ \hline \end{tabular}