Mosl financial advisory providing financial service to the customers.it has 4 ad
ID: 2430578 • Letter: M
Question
Mosl financial advisory providing financial service to the customers.it has 4 advisor who each expect to work 2000 hour per year chargable.and each salary is 90,000 per year.now company employes 2 more Admin staff whose all together(combine salary )is 110,000 per year.other estimated cost for the year is like,(non- salary costs) rent - 30,000,Advertisement - 2,000,client palce travelling cost 10,000,cost of accomodation when vist client 8,000,mobile cost 7,000.
Mosl has allocating costs to each client the chargeable hours spent on each client and charging clent using a single cost rate for all costs based on chargeable hours. same rate using when preparing quatation for the new client.
mosl reviewed their and conclude that they have three diffrent kind of client group.
calculate:
single rate cost used to allocate cost.what will be allocated cost for each 3 client group under the current method?
calculate cost allocated to each client group using the activity based system allocation cost.
Town client stateclient countryClient hourly charge to the client 70 500 200 distance to client(km) 40 80 110 no.of visit to client 5 9 2 ech group has no.of client 7 5 3Explanation / Answer
In single rate cost used to allocate cost The Total Cost pool will be allocated Client per Chargeable hours spend irrespective of Fixed or variable costs(individual Cost pools).
Single rate (Budgeted) cost allocation rate =Totsl cost pool /budgeted hours
........................................................................=527,000 /(2000Hours*4advisor) =527,000/8000 = 65.875 Per Hour.
Rate of 263.5 per hour is indifferent for clients under current system .(As mentioned in question "single cost rate for all costs based on chargeable hours")
activity based system allocation cost
Under ABC costing Costs are identified and allocated based on individual Cost pools(reason for incurring Cost) Is measured on based on Cost Driver(Units).
So under ABC basis for each Cost pool is to be identified.
Per Cost driver(Cost Pool/Total Cost driver)
W1) Travelled Kms is calculated
Consider Going and returning*2 to client site. Multiply by no:of visits
So, Country-40 *2 * 5 = 400
State 80* 2 * 9 =1440
Country 110 * 2 * 2 =440
Total .............. 2,280
Total Cost Cost Pool Salary of Advisors (90,000*4) 360,000 Admin Staff 110,000 Rent 30,000 Advertisment 2,000 Travel Cost 10,000 Accomodation at client site 8,000 Mobile Cost 7,000 Total Cost 527,000Related Questions
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