Single and Dual Charging Rates Jeff McMillan owns a small neighborhood shopping mall. Of the 10 store spaces in the building, seven are rented by boutique owners and three are vacant. Jeff has decided that offering more services to stores in the mall would enable him to increase occupancy. He has decided to use one of the vacant spaces to provide, at cost, a gift-wrapping service to shops in the mall. The boutiques are enthusiastic about the new service. Most of them are staffed minimally, which means that every time they have to wrap a gift, phones go unanswered and other customers in line grow impatient. Jeff figured that the gift-wrapping service would incur the following costs: the store space would normally rent for $1,900 per month, part-time gift wrappers could be hired for $1,400 per month, and wrapping paper and ribbon would average $1.40 per gift. The boutique owners estimated the following number of gifts to be wrapped per month. Number of Gifts Store Wrapped per Month The Stationery Station 175 Arts & Collectibles 400 Kid-Sports 100 Java Jim's 75 Designer Shoes 20 Cristina's Closet 130 Alan's Drug and Sundries 100 After the service had been in effect for six months, Jeff calculated the following actual average monthly number of gifts wrapped for each of the stores. Actual Average Number of Store Gifts Wrapped per Month The Stationery Station 160 Arts & Collectibles 420 Kid-Sports 240 Java Jim's 10 Designer Shoes 50 Cristina's Closet 200 Alan's Drug and Sundries 450 Required: 1. Calculate a single charging rate, on a per-gift basis, to be charged to the shops. If required, round your final answer to the nearest cent. per gift Based on the shops' actual number of gifts wrapped, how much would be charged to each shop using the single charging rate? Store Total Charge The Stationery Station Arts & Collectibles Kid-Sports Dollll Java Jim's Designer Shoes Cristina's Closet Alan's Drug and Sundries 2. Based on the shops' actual number of gifts wrapped, how much would be charged to each shop using the dual charging rate? If required, round the allocation percentages to 4 decimal places and round your computed allocation amount to the nearest cent. Store Total Charge The Stationery Station Arts & Collectibles Kid-Sports Java Jim's Designer Shoes Cristina's Closet Alan's Drug and Sundries 3. Which shops would prefer the single charging rate? Why? a. The Stationery Station b. Arts & Collectibles c. Kid-Sports d. Java Jim's e. Designer Shoes f. Cristina's Closet g. Alan's Drug and Sundries vusage. The single charging rate assigns less of the fixed cost to the shops In the single rate method, fixed costs are included in the rate based on using of the service
