Outdoor Amusement Fun is an amusement park located in Vancouver, British Columbi

Question

Outdoor Amusement Fun is an amusement park located in Vancouver, British Columbia. It is organized into 3 departments: arcades and shows, food and beverage, and rides. Outdoor Amusement Fun is implementing an ABC system to allocate the costs of the support activities (communications, human resources, and maintenance) to product-line departments (arcades and shows, food and beverage, and rides). Thus, the product-line departments are the cost objects. The total costs and cost drivers for each service activity are:

Information regarding cost drivers and allocation bases is as follows:

Direct costs and revenues for each product-line department are as follows:

a) Calculate the operating profit (revenues – direct costs – allocated costs) for each product-line department.

Activity Total Cost Cost Driver Communication $20,000 # of Memos Human Resources $25,000 # employees Maintenance $30,000 Sq. meters

Explanation / Answer

Allocation of cost :

a) Calculate the operating profit (revenues – direct costs – allocated costs) for each product-line department.

Arcades & Shows Food & Beverage Rides Communications 8000 4800 7200 Human resources 6000 12000 7000 Maintainance 9000 6000 15000 Total 23000 22800 29200

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