-11 Microuoft Edge oress Conference Solutions specializes in the design and inst
ID: 2509315 • Letter: #
Question
-11 Microuoft Edge oress Conference Solutions specializes in the design and installation of meeting and conference centers for large corporations. When bidding or estimates product cost and direct labor for installers and marks up the total cost by 30 percent. On a recent job for Orvieto Industries, the company set its price as follows: jobs, the company Product costs including podiums, seating, lighting, etc. $174,200 24,600 198,800 59,640 $258,440 Installer salaries Total Markup at 30 percent Bid price The job turned out to be a big hassle. Orvieto requested 24 change orders, although the dollar value of the products it requested changed very latle. The company also returned 33 items that had extremely minor flaws (scratches that were barely visible and would be expected in normal shipping). Orvieto also requested seven meetings with designers taking 39 hours before its plan was finalized. Normally, only two or three meetings are necessary. to three Alison Jackson, controller for Foress, decided to conduct a customer profitability analysis to deter we the profitability of Oveto. She categories with the following drivers: upe sup eos Value of Driver Driver Change orders Number of returns Annual 790 change orders 1,060 product returns Annual Cost $203,030 75,260 82,460 Design meeting hours 1,330 meeting hours Calculate the indirect service costs related to the job performed for Orvieto Industries Change orders sL Returns Design hours Total O Type here to searchExplanation / Answer
First of all we need to calculate activity rate for each indirect service which is shown as follows:-
Activity Rate for change Orders = Annual Cost/Annual Value of driver
= $203,030/790 change orders = $257 per change order
Activity Rate for returns = Annual Cost/Annual Value of driver
= $75,260/1,060 = $71 per return
Activity Rate for Design Hours = Annual Cost/Annual Value of driver
= $82,460/1,330 = $62 per meeting hour
Calculation of Indirect service cost related to job performed for Orvieto Industries
Service Activity Used (A) Activity Base Rate (B) Indirect Service Costs (A*B) Change Orders 24 change orders $257 6,168 Returns 33 returns $71 2,343 Design Hours 39 meeting hours $62 2,418 Total 10,929Related Questions
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