Kenosha Winter Services is a small family-owned snow-removal business. For its s
ID: 2537927 • Letter: K
Question
Kenosha Winter Services is a small family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square metres of snow removal. The current fee is $12.75 per hundred square metres. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on more remote properties that require considerable travel time. The owner's daughter, home from school for the summer, has suggested investigating this question using ABC. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Snow removal Travel to jobs Job support Other (costs of idle capacity and Square metres cleaned (00s) Kilometres driven Number of jobs 32,000 hundred square metres 15,000 kilometres 400 jobs organization-sustaining costs) None NA The total cost of operating the company for the year is $390,000, which includes the following costs Wages Snow removal equipment depreciation Vehicle expenses Office expenses President's compensation $150,000 40,000 20,000 40,000 60,000 80,000 Total cost $390,000 Resource consumption is distributed across the activities as follows Distribution of Resource Consumption across Activity Cost Pools Snow Travel Job Removal to Jobs Support 0% 0% 0% 0% 45% 40% Other 10% 0% 20% 40% 55% 60% Total 100% 100% 100% 100% 100% 100% Wages 10% 0% 0% 60% 0% 0% 80% 100% Snow removal equipment depreciation Vehicle expenses Office expenses President's compensation 0% 0% 0%Explanation / Answer
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Snow Removal Travel to Jobs Job Support Other Total Wages 120000 15000 0 15000 150000 Supplies 40000 0 0 0 40000 Snow removal equipment depr. 16000 0 0 4000 20000 Vehicle expenses 0 24000 0 16000 40000 Office expenses 0 0 27000 33000 60000 President's compensation 0 0 32000 48000 80000 Total cost 176000 39000 59000 116000 390000Related Questions
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