Compute the activity rates for all the activity cost pools.
The attached document has all the details for this case.  Please provide extensive details on the calculations and logic on why something was excluded or included.  I am trying to understand this so the more detail up front, the more you can avoid me following up with more questions for clarification. Thanks,
Questions on the case:
- Compute the activity rates (i.e. cost per unit of activity) for all the activity cost pools.
- Using the activity-based costing system, compute the customer margin for the Roessler Family
- Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of mowing hours. Compute the margin for the Roessler Family.
- The president of Bob's Yard Mowing asks you to explain your decision about how you handled the cost of idle capacity in your calculations above. Explain your reasoning to the president.
- The president also asks you about possible cost savings that could be realized by reducing the total number of jobs by 50. Since the activity level for jobs will decrease, the president says that the savings must be calculated by multiplying the decline in jobs times the activity rate for job support. What is your response to the president?
Bob's Yard Mowing Bob'd Yard Moving provides yard cleaning services to its clients. The company uses an ac±vity-based cos±ng system for its overhead costs. The company has provided the following data from its ac±vity-based cos±ng system. ActviTy CosT Pool ±oTal CosT ±oTal ActviTy UniT CosT/uniT Mowing $645,576 72,700 hours $8.88 Job Support $129,546 5,400 jobs $23.99 Client Support $20,900 760 clients $27.50 Other $110,000 *cost of idle capacity based on a $906,022 ClienT jobs hours charge Roessler family 31 62 $1,620 $743.69 $550.56 $1,294.25 1) CompuTe The actviTy raTes (i.e. cosT per uniT of actviTy) for all The actviTy cosT pools. 2) Using The actviTy-based costng sysTem, compuTe The cusTomer margin for The Roessler Family 3) Assume The company decides insTead To use a Traditonal costng sysTem in which ALL cosTs are a The margin for The Roessler Family. 4) ±he presidenT of Bob's Yard Mowing asks you To explain your decision abouT how you handled Th reasoning To The presidenT. 5) ±he presidenT also asks you abouT possible cosT savings ThaT could be realized by reducing The To decrease, The presidenT says ThaT The savings musT be calculaTed by multplying The decline in jobs t The presidenT?
Answers
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Posted 19 Dec 2017 07:12 AM
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