Question 1 Kenosha Winter Services is a small family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square metres of snow removal. The current fee is $11.55 per hundred square metres. 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 daughter, 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 Snow removal Travel to jobs Job support Other (costs of idle capacity and organization-sustaining costs) Activity Measure Square metres cleared (00s) Kilometres driven Number of jobs None Activity for the Year 40,055 hundred square metres 20,625 kilometres 250 jobs N/A The total cost of operating the company for the year is $442,500, which includes the following costs: $171,000 43,500 Wages Supplies Snow removal equipment depreciation Vehicle expenses Office expenses President's compensation Total Cost 23,500 43,500 67,000 94,000 $442,500 Resource consumption is distributed across the activities as follows: Wages Supplies Snow removal equipment depreciation Vehicle expenses Office expenses President's compensation Distribution of Resource Consumption across Activity Cost Pools Snow Removal Travel to Jobs Job Support Other Total 80% 10% 0% 10% 100% 100% 0% 0% 0% 100% 85% 0% 15% 100% 65% 0% 35% 100% 0% 0% 45% 55% 100% 0% 0% 35% 65% 100% 0% 0% Jobs support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools (round your answers to 2 decimal places) 3. The company recently completed a 4,200-square-metre snow removal job at Hometown Hardware-a 82-kilometre round-trip journey from Kenosha's offices. Compute the cost of this job using the ABC system. (Round your answers to 2 decimal places. 4. The revenue from the Hometown Hardware job was $485.10 (4,200 square metres at $11.55 per hundred square metres). Prepare a report showing the margin from this job. (Round your answer to 2 decimal places). Resource consumption is distributed across the activities as follows: Wages Supplies Snow removal equipment depreciation Vehicle expenses Office expenses President's compensation Distribution of Resource Consumption across Activity Cost Pools Snow Removal Travel to Jobs Job Support Other Total 80% 10% 0% 10% 100% 100% 0% 0% 0% 100% 85% 0% 15% 100% 0% 65% 35% 100% 0% 0% 45% 55% 100% 0% 0% 35% 65% 100% 0% 0% Jobs support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools (round your answers to 2 decimal places) 3. The company recently completed a 4,200-square-metre snow removal job at Hometown Hardware-a 82-kilometre round-trip journey from Kenosha's offices. Compute the cost of this job using the ABC system. (Round your answers to 2 decimal places. 4. The revenue from the Hometown Hardware job was $485.10 (4,200 square metres at $11.55 per hundred square metres). Prepare a report showing the margin from this job. (Round your answer to 2 decimal places)
