4. Transformations Hair Salon uses an activity-based costing system in its beaut

Question

4. Transformations Hair Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows: Activity Rate $1.50 $2.00 $20.00 S10.00 Chemical treatment Using the information provided, determine the cost of services for each of the following services provided by the salon: (a) Chemical Treatment Hair Washing Conditioning Styling aircut Complete style erm Highlights (b) If the company budgets 10,000 haircuts, 4,000 complete styles, 3,500 perms, and 5,500 highlights, determine the budget for cost of services.

Explanation / Answer

Activity Activity Rate Hair Washing 1.50 Conditioning 2.00 Chemical Treatment 20.00 Styling 10.00 Particulars Hair Washing Conditioning Chemical Treatment Styling Hair Cut 1 1 0 0 Complete Style 1 1 0 1 Perm 2 3 1 1 Highlights 3 4 2 1 A Particulars Hair Washing Conditioning Chemical Treatment Styling Total Hair Washing Conditioning Chemical Treatment Styling Hair Cut 1.50 2.00 0.00 0.00 3.50 1*1.5 1*2 0*20 0*10 Complete Style 1.50 2.00 0.00 10.00 13.50 1*1.5 1*2 0*20 1*10 Perm 3.00 6.00 20.00 10.00 39.00 2*1.5 3*2 1*20 1*10 Highlights 4.50 8.00 40.00 10.00 62.50 3*1.5 4*2 2*20 1*10 B Particulars Budget Hair Cut 10000 Complete Style 4000 Perm 3500 Highlights 5500 Budgeted Activity Level based on Budget Units: Particulars Hair Washing Conditioning Chemical Treatment Styling Hair Washing Conditioning Chemical Treatment Styling Hair Cut 10000 10000 0 0 1*10000 1*10000 0*10000 0*10000 Complete Style 4000 4000 0 4000 1*4000 1*4000 0*4000 1*4000 Perm 7000 10500 3500 3500 2*3500 3*3500 1*3500 1*3500 Highlights 16500 22000 11000 5500 3*5500 4*5500 2*5500 1*5500 Budgeted Cost of Services: Particulars Hair Washing Conditioning Chemical Treatment Styling Total Hair Washing Conditioning Chemical Treatment Styling Hair Cut 15000 20000 0 0 35000 10000*1.5 10000*2 0*20 0*10 Complete Style 6000 8000 0 40000 54000 4000*1.5 4000*2 0*20 4000*10 Perm 10500 21000 70000 35000 136500 7000*1.5 10500*2 3500*20 3500*10 Highlights 24750 44000 220000 55000 343750 16500*1.5 22000*2 11000*20 5500*10

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