7. Andracki Housecleaning provides housecleaning services to its clients. The co

Question

7. Andracki Housecleaning provides housecleaning services to its clients. The company uses an activity- based costing system for its overhead costs. The company has provided the following data from its activity-based costing system. Activity Cost Pool Total Cost Total Activity Cleaning Job support Client support.. Other Total $442.068 1,900 jobs 350 clients Not applicable 52,801 9.170 110,000 $614,039 The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs One particular client, the Lason family, requested 46 jobs during the year that required a total of 92 hours of housecleaning. For this service, the client was charged S2,230 Required a. Compute the activity rates (ie., cost per unit of activity) for the activity cost pools. Round off all calculations to the nearest whole cent. b. Using the activity-based costing system, compute the customer margin for the Lason family. Round off all calculations to the nearest whole cent. c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Lason family. Round off all calculations to the nearest whole cent.

Explanation / Answer

a.

b.

c. Predetermined rate = ($614039 - $110000) / 78800 hours = $504039 / 78800 = $6.40 per hour

Activity Cost Pool Total Cost $ Total Activity Activity Rates $ Cleaning 442068 78800 5.61 per hour Job support 52801 1900 27.79 per job Client support 9170 350 26.20 per client Total 504039

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