lable l Overhead Activity Cost Pools & Activity Measures Activity Cost Poo Activ
ID: 2547961 • Letter: L
Question
lable l Overhead Activity Cost Pools & Activity Measures Activity Cost Poo Activity Measure Cleaning carpets Travel to from jobs Miles driven Activity for the Year 100 square feet 20,000 blocks of 100 square feet 60,000 miles Number of jobs Not applicable g costs and idle capacity costs The total cost of operating the [^me carpet cleaning services for the year is S430,000 as shown in Table 2. Table 2 Total Home Carpet Cleaning Service Costs Wages_--- 150,000 $40,000 20,000 80,000 60,000 Cleaning supplies Vehicle expenses Service Manager's salary Total Costs It was decided to include wages in the overhead activity pools because the technicians also talk with customers who have problems or complaints and also work on the company vehicles when needed. Additionally, both of the support staff employees are trained to go out on jobs and do so if needed. Having the technicians and support staff to log how they spent their time would not be helpful and probably would not be received well by the employees. Consequently, it was decided that the cost of wages be allocated to the four cost pools based on the CEO's and service manager's experience with the company. All other distributions of resource consumption across the activities (cost pools) were based on an analysis of company records.Explanation / Answer
STATEMENT SHOWING FIRST STAGE ALLOCATION OF COST TO ACTIVITY POOL BASIS OF Cleaning Travel to Job Support Other Total APPORTION IN $ IN $ IN $ IN $ IN $ Wages and salaries 70:20:5:5 105,000 30,000 7,500 7,500 150,000 equipment depreciation 70:0:0:30 14,000 0 0 6,000 20,000 Vehiccle expense 0:55:0:45 0 44,000 0 36,000 80,000 Office expense 0:0:40:60 0 0 24,000 36,000 60,000 Service manager salary 0:0:40:60 0 32,000 48,000 80000 TOTAL COST OF ACTIVITY 119,000 74,000 63,500 133,500 390,000 STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Cleaining 100 sq. feet 74,000 20,000 3.70 Travel miles 63,500 60,000 1.06 Support Jobs 133,500 2,000 66.75 OH Cost of Job Circle H-ranch: Cleaning (5 blocks @3.70 18.5 Travel (50 miles @1.06) 53 Support (1 job @$66.75 66.75 OH cost of Job Circle Hranch: 138.25 Req 4: CUSTOMER MARGIN : Sales revenues 150 Less: Cost Supplies 21.5 Cleaning 18.5 Travel 53 Support 66.75 Total cost 159.75 CUSTOMER MARGIN : -9.75
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