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The owner is not sure about the profitability of each service, Eongroup and Eonmsart, therefore has asked his staff to collect the following information: Offers
The owner is not sure about the profitability of each service, Eongroup and Eonmsart, therefore has asked his staff to collect the following information: Offers handled 7500 No. of employees 15 Division/Products Costs Indirect labour hours Information System and $854,000 21,350 Technical Supports (ISTS) Sales & Marketing (S&M) $825,600 55,000 Membership Services (MS) $525,000 17,500 Office Administrations (Admin) | $498,800 11,000 Eongroup $300,000 * 20,000 Eonmart $50,000 * 8,000 Total 3,053,400 * = Direct Cost to the Products/Services with details as follows: 7500 7500 7500 5000 2500 Eongroup Eonmart Total Number of offers/Advertisements 7,500 5,000 $20 per hour 3 Direct labour cost ISTS Average direct ISTS labour hour per offer 2,500 $20 per hour 1 - Initially, as a small start-up, Thompson uses the traditional direct method to allocate indirect services costs. The admin division is considered to be the most influential to the strategic direction and operations of the company. Its costs are allocated based on the number of employees in each division and products/services. Other service divisions allocated costs based on indirect labour hours. Required 1. (10 marks) Determine the product costs for Eongroup and Eonmart using the present accounting system. All calculations are done to the nearest dollar
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