Graham Snow Removal Company has the following cost data Cost $400,000 $250,000 $

Question

Graham Snow Removal Company has the following cost data Cost $400,000 $250,000 $100,000 $150,000 $50,000 $300,000 $1,250,000 Account Driver wages Vehicle operating expense Vehicle depreciation Customer representative salaries & expenses Office expenses Administrative expenses total After a careful analysis of their business processes and primary activities, they have ollated the results in the table below by applicable cost pool. Plowing & Customer Travel 40% Saltin 50% Service 10% Other 0% Totals 100% Driver wages Vehicle operating expense Vehicle depreciation Customer representative 66% 70% 24% 20% 096 0% 1096 10% 100% 100% (fuel, repairs, etc. 0% 10% 0% 40% 40% 30% 50% 10% 60% 10% 40% 10% 100% 100% 100% salaries and expenses Office expenses Administrative expenses

Explanation / Answer

Answer 1 Allocation of cost to applicable cost pools Travel Plowing and salting Customer Service Other Totals Driver Wages $160,000 $200,000 $40,000 $0 $400,000 Vehicle Operating Expense $165,000 $60,000 $0 $25,000 $250,000 Vehicle Depreciation $70,000 $20,000 $0 $10,000 $100,000 Customer representative salaries and expenses $0 $60,000 $75,000 $15,000 $150,000 Office Expenses $5,000 $20,000 $5,000 $20,000 $50,000 Administrative Expenses $0 $90,000 $180,000 $30,000 $300,000 Totals $400,000 $450,000 $300,000 $100,000 $1,250,000 Answer 2 Calculation of rate for each activity cost pool Activity Volume Allocated Cost Activity Rate Travel (kilometers) 620000 $400,000 $0.65 per kilometer Plowing and Salting (square meters) 10000 $450,000 $45.00 per square meter Customer Service (hours) 10000 $300,000 $30.00 per hour Other N/a $100,000 Answer 3 Calculation of price quoted to a new customer Travel [2 * 25 Kms * 10 trips = 500 Kms] $322.58 Plowing and Salting (1000 square meters) $45,000.00 Customer Service [10 hours] $300.00 Total Cost $45,622.58 Add : 40% Markup $18,249.03 Price quoted to a New Customer $63,871.61

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