Brookside Property Management is a property management service company for small
ID: 2466120 • Letter: B
Question
Brookside Property Management is a property management service company for small shopping malls and uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the area of the outdoor maintenance (parking lots, sidewalks, and gardens), the area of indoor tenant space in the shopping mall, the distance to travel to the shopping mall, and the number of shopping malls managed. In addition the costs of managing the indoor tenant space depend on whether the tenants are located on the main level or other levels of the mall. Accordingly, the company uses the five activity cost pools listed below:
Activity Cost Pool
Activity Measure
Management of outdoor areas
Square metres of outdoor areas
Management of indoor mall space- main level
Square metres of main level mall space
Management of indoor mall space- other levels
Square metres of non-main level mall space
Travel to jobs
Kilometres
Customer billing and service
Number of shopping malls
The company has already carried out its first-stage allocations of costs. The company’s annual costs and activities are summarized as follows:
Activity Cost Pool
Estimated Overhead Cost
Expected Activity
Management of outdoor areas
$ 69,850
127,000sq metres of outdoor area
Management of indoor mall space- main level
$ 114,400
104,000sq metres of main level mall space
Management of indoor mall space- other levels
$ 307,500
246,000sq metres of non-main level mall space
Travel to jobs
$ 6,600
22,000 Kilometres
Customer billing and service
$ 13,800
8 Shopping malls
*Compute the activity rate for each of the activity cost pools.
Activity Cost Pool
Activity Measure
Management of outdoor areas
Square metres of outdoor areas
Management of indoor mall space- main level
Square metres of main level mall space
Management of indoor mall space- other levels
Square metres of non-main level mall space
Travel to jobs
Kilometres
Customer billing and service
Number of shopping malls
Explanation / Answer
Answer:
Activity rate = Estimated overhead cost/ Expected activity
Management of outdoor areas : 69850/127000 = $0.55 per square metre
Management of indoor mall space- main level: 114400/104000 = $1.1 per square metre
Management of indoor mall space- other levels: 307500/246000 = $1.25 per square metre
Travel to jobs: 6600/22000 = $0.3 per kilometre
Customer billing and service: 13800/8 = $1725 per mall
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