Question

Brookside Property Management is a property management service company for all small shopping malls that uses...

Brookside Property Management is a property management service company for all small shopping malls that uses ABC to estimate costs for pricing and other purposes. The owner of the company believes that costs are driven primarily by the area of outdoor maintenance ( parking lots, sidewalk, and gardens), the area of indoor tenant space in the shopping mall, the distance to travel to the shopping mall, and the number of shopping malls managed. In addition., the costs of managing the indoor tenant space depend on whether the tenants are located on the main level or other levels of the mall. Accordingly, the company uses the five activity cost pools listed below:

Activity Cost Pool Activity Measure
Management of outdoor areas Square meters of outdoor area
Management of indoor mall space--main level Square meters of main level mall space
Management indoor mall space--other levels Square meters of non-main level mall space
Travel to jobs Kilometers
Customer billing and services. Number of shopping mall

The company has already carried out its first-stage allocation of costs. The company's annual costs and activities are summarized as follows:

Activity Cost Pool Estimated overhead Cost Expected Activity
Management of outdoor areas $69,850 127,000 Square meters of outdoor area
Management of indoor mall space--main level $114,400 104,000 Square meters of main level mall space
Management indoor mall space--other levels $307,500 246,000 Square meters of non-main level mall space
Travel to jobs $6,600 22,000 Kilometers
Customer billing and services. $13,800 8 Shopping malls

Parker Hills Shopping Mall is one of Brookside's oldest clients. Details concerning the mall's layout, outdoor space, and distance from Brookside's head office are as follows:

Activity Total activity for Parker Hills Mall
Management of outdoor areas 16,000 Square meters of outdoor area
Management of indoor mall space--main level 25,000 Square meters of main level mall space
Management indoor mall space--other levels 0, as mall only has one level
Travel to jobs 2,500 kilometers travelled
Customer billing and services 1 shopping mall

Required:

2. Determine the total overhead cost that would be assigned to the Parker Hills Shopping Mall using the ABC system.

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Homework Answers

Answer #1
Activity Cost Pool Activity rate
Management of outdoor areas 0.55 =69850/127000
Management of indoor mall space--main level 1.10 =114400/104000
Management indoor mall space--other levels 1.25 =307500/246000
Travel to jobs 0.30 =6600/22000
Customer billing and services. 1725.00 =13800/8
2
Activity Cost Pool Activity rate Activity ABC cost
Management of outdoor areas 0.55 16000 Square metres 8800
Management of indoor mall space--main level 1.10 25000 Square metres 27500
Management indoor mall space--other levels 1.25 0 Square metres 0
Travel to jobs 0.30 2500 kms 750
Customer billing and services 1725.00 1 Shopping mall 1725
Total cost assigned 38775
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