Randy's Roofing is a city wide company specializing in replacing shingle roofs.Lately, Randy has been puzzled by the fact that though some of his jobs appear to make good money, he doesn't seem to come out as profitable at the end of each month as he thinks he should.

In exchange for some work on your own roof, Randy asks you to help him better understand his costs and how he can price his jobs better.He tells you his total costs are $220,000 every month and that number never changes.You ask him what are the different components of his costs and he lists them as shown below, together with what Randy says is a breakdown of where the costs are incurred.

Activity

Replacing

Shingles

Travelling

to jobs

Office Work

Promotion

For new jobs

Total Allocation

Cost

Per month

Wages

80%

20%

0

0

100%

$160,000

Shingles

100%

0

0

0

100%

20,000

Shingle Disposal

100%

0

0

0

100%

5,000

Truck Expenses

0

100%

0

0

100%

5,000

Randy's car

0

0

30%

70%

100%

3,000

Randy's salary

0

0

20%

80%

100%

10,000

Office Expenses

0

0

70%

30%

100%

17,000

TOTAL

$220,000

Randy then tells you that he does 5,000 square metres of shingle roofs every month and his crews travel about 2,000 kilometres to get to and from the jobs.Last month his crews did 200 roofs.He also shows that he did a job for Leaky Eaves last month for $7,000 and he allocated $6,000 in costs, based on his usual method of allocating costs (which was an estimate of what he thought the job should cost.)Randy said that the Leaky Eaves roof was 200 square metres and to get to the job and back to his yard was 150 kilometres.

Instructions

See If there is a way ABC can help Randy understand whether the Leaky Eaves made profit or not. . YOUR answer must contain a paragraph advising randy of his outcomes.

ABC Assignment Question 1 Randy's Roofing is a city wide company specializing in replacing shingle roofs. Lately, Randy has been puzzled by the fact that though some of his jobs appear to make good money, he doesn't seem to come out as profitable at the end of each month as he thinks he should. In exchange for some work on your own roof, Randy asks you to help him better understand his costs and how he can price his jobs better. He tells you his total costs are $220,000 every month and that number never changes. You ask him what are the different components of his costs and he lists them as shown below, together with what Randy says is a breakdown of where the costs are incurred. Activity Wages Shingles Shingle Disposal Truck Expenses Randy's car Randy's salary Office Expenses Replacing Shingles Travelling to jobs 80% 100% 100% 0 0 0 0 20% 0 0 100% 0 0 0 Office Work 0 0 0 0 30% 20% 70% Promotion For new jobs 0 0 0 0 70% 80% 30% Total Allocation 100% 100% 100% 100% 100% 100% 100% TOTAL Cost Per month $160,000 20,000 5,000 5,000 3,000 10,000 17,000 $220,000 Randy then tells you that he does 5,000 square metres of shingle roofs every month and his crews travel about 2,000 kilometres to get to and from the jobs. Last month his crews did 200 roofs. He also shows that he did a job for Leaky Eaves last month for $7,000 and he allocated $6,000 in costs, based on his usual method of allocating costs (which was an estimate of what he thought the job should cost.) Randy said that the Leaky Eaves roof was 200 square metres and to get to the job and back to his yard was 150 kilometres. Instructions See If there is a way ABC can help Randy understand whether the Leaky Eaves made profit or not. . YOUR answer must contain a paragraph advising randy of his outcomes. ABC Assignment Question 2 Mike Kyekyeku is a sole proprietorship that provides consulting and tax preparation services to its clients. Mike charges a fee of $100 per hour for each service and can devote a maximum of 4,000 hours annually to his clients. He reported the following revenues and expenses for 2008: Revenue Expenses (all overhead costs): Secretarial Support Supplies Computer costs, etc. Net income (loss) $400,000 $84,000 72,000 48,000 204,000 $196,000 Being an accountant, Mike kept good records of the following data for 2008: Revenue: Tax Preparation Consulting Total Overhead Cost Secretarial support Supplies Computer cost, etc. $130,000 270,000 $400,000 Cost Driver Number of clients Transactions with clients Computer hours Tax 72 200 1,000 Activity Level Consultin g 48 300 600 Total 120 500 1,600 Required: a. Should Mike emphasize one service more than the other if Mike were to allocate all the overhead costs using direct-labours as the only overhead cost driver (1,300 for Tax and 2,700 for Consulting)? Support your decision with the relevant calculations and/or analysis. b. Identify each of the three cost drivers as either unit-level, batch-level, product-level, customer-level, or organization-sustaining. c. How might Mike's product/service emphasis decision in Part a above be altered if he were to allocate all the overhead costs using activity-based costing and the three cost drivers, that is, number of clients, number of transactions with clients, and computer hours? Show all your supporting calculations and/or analysis, including any necessary explanation