CALCULATOR PRINTER VERSION ‘BACK Problem 7-23 Swifty Consulting provides weekly

Question

CALCULATOR PRINTER VERSION ‘BACK Problem 7-23 Swifty Consulting provides weekly payroll processing for a number of small businesses. Gia Swifty, the company's owner, has been using an activity-based costing system for several years. She used the following information in preparing this year's budget. Total Cost Expected Driver Volume Activity Cost Pool Setting up new employees Cost Driver 77,000 Number of new employees 500 Number of paychecks Processing weekly payroli$717.159 Weekly reporting Annual tax reporting 2,519,000 100 63,200 320,000 Number of clients 316,000 Number of W-2s printed Calculate the cost rates for each activity cost pool. (Round answers to 2 decimal places, e.g.15.25) Cost Pool Activity Rate Settig up new employes Processing weekly payroll Weekly reporting Annual tax reporting new employee check /client

Explanation / Answer

Calculation of cost rates for each activity cost pool:

Particulars

Formula used

Cost rate

Setting up new employees

(Total cost/ Number of new employees)

(77000/500)

      154.00

Processing weekly payroll

(Total cost/ Number of pay checks printed)

(717159/2519000)

           0.28

Weekly Reporting

(Total cost / Number of clients)

(320000/100)

   3,200.00

Annual tax reporting

(Total cost /Number of W2s printed)

(316000/63200)

           5.00

Setting up new employees

(154 X 18)

   2,772.00

Note: Since number of employees are 18

Processing weekly payroll

(18X52) X 0.28

      262.08

Note: Since there is 52 weeks in a year and the number of employees are 18

Weekly Reporting

(3200 X1)

   3,200.00

Note: Since there is only one client

Annual tax reporting

(5 X 1)

           5.00

Note: Since the number of W-2s to be printed is only one as the client is only one.

Estimated cost of weekly payroll services

   6,239.08

Calculation of cost rates for each activity cost pool:

Particulars

Formula used

Cost rate

Setting up new employees

(Total cost/ Number of new employees)

(77000/500)

      154.00

Processing weekly payroll

(Total cost/ Number of pay checks printed)

(717159/2519000)

           0.28

Weekly Reporting

(Total cost / Number of clients)

(320000/100)

   3,200.00

Annual tax reporting

(Total cost /Number of W2s printed)

(316000/63200)

           5.00

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