50.1K

Verified Solution

Link Copied!

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 $12.70 per hundred square metres. However, there is some question about whether the company is actually making any money on jobs for some customersparticularly those located on more remote properties that require considerable travel time. The owners 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 Activity Measure Activity for the Year

Snow removal Square metres cleaned (00s) 43,600 hundred square metres

Travel to jobs Kilometres driven 25,350 kilometres

Job support Number of jobs 200 jobs

Other (costs of idle capacity and organization-sustaining costs) None NA

The total cost of operating the company for the year is $532,500, which includes the following costs:

Wages $ 207,000

Supplies 49,500

Snow removal equipment depreciation 29,500

Vehicle expenses 49,500

Office expenses 79,000

Presidents compensation 118,000

Total cost $ 532,500

Resource consumption is distributed across the activities as follows:

Distribution of Resource Consumption

across Activity Cost Pools

Snow Removal Travel to Jobs Job Support Other Total

Wages 70 % 20 % 0 % 10 % 100 %

Supplies 100 % 0 % 0 % 0 % 100 %

Snow removal equipment depreciation 80 % 0 % 0 % 20 % 100 %

Vehicle expenses 0 % 70 % 0 % 30 % 100 %

Office expenses 0 % 0 % 40 % 60 % 100 %

Presidents compensation 0 % 0 % 45 % 55 % 100 %

Job 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. (Do not leave any empty spaces; input a 0 wherever it is required.)

2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

3. The company recently completed a 5,400-square-metre snow removal job at Hometown Hardwarea 94-kilometre round-trip journey from Kenoshas 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 $685.80 (5,400 square metres at $12.70 per hundred square metres). Prepare a report showing the margin from this job. (Round your answers to 2 decimal places.)

5. This part of the question is not part of your Connect assignment.

6. This part of the question is not part of your Connect assignm

Answer & Explanation Solved by verified expert

See Answer