Question

Duckhorn Housecleaning provides housecleaning services to its clients. The company uses an activity-based costing system for...

Duckhorn 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 $645,576 72,700 hours Job support $129,546 5,400 jobs Client support $ 20,900 760 clients Other $110,000 Not applicable Total $906,022 The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Lumbard family, requested 31 jobs during the year that required a total of 62 hours of housecleaning. For this service, the client was charged $1,620 Required:

a. Compute the activity rates (i.e., 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 Lumbard 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 Lumbard family. Round off all calculations to the nearest whole cent.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer to part A:

Calculation of the activity rates:-
Activity Name        TotalCost     Total Activity            Activity Rates
Cleaning    $645,576      72,700 hours            $8.88 per hour
Job support           $129,546        5,400 jobs              $23.99 per job
Client support        $20,900         760 clients              $27.50 per client

Answer to part B:

Calculation of customer margin for the family:-

Client charges = $1,620.00
Costs: Cleaning = $550.56
     Job support = $ 743.69
Client support = $ 27.50
Total Cost:       = $ 1,321.75
Hence Customer margin = $ 298.25

Working Note:

Calculation of costs:
Cleaning: 62 hours × $8.88 per hour = $550.56
Job support: 31 jobs × $23.99 per job = $743.69
Client support: 1 client × $27.50 per client = $27.50

Answer to part C:

Calculation of the margin if all costs are allocated on the basis of cleaning hours:

Predetermined overhead rate = $906,022 ÷ 72,700 hours = $12.46 per hour

Client charges = $1,620.00
Allocated costs= $ 772.52
Customer margin = $ 847.48

Working Note

Allocated cost = 62 hours × $12.46 per hour = $772.52

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The Green Thumb Gardening Service provides gardening services to its clients. The company uses an activity-based...
The Green Thumb Gardening Service provides gardening 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 Gardening $150,575 18,500 hours Job support 29,375 1,815 jobs Client support 5,270 270 clients Other    65,000 Not applicable Total    $250,220 The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client,...
Salvatore LLC provides a wide variety of legal service and uses an activity-based costing system. Data...
Salvatore LLC provides a wide variety of legal service and uses an activity-based costing system. Data from its activity-based costing system for all services follows: Activity cost pool total cost total activity research $173,200 620 hours of paralegal time client meeting 345,300 3900 number of meeting hours court filling fees 303,500 1600 number of cases document preparation 145,600 4900 number of documents The cost pool activity rate for client meeting is: A. $58.29 per meeting hour B. $7.08 per meeting...
Hopscotch​ Limited, a manufacturer of a variety of​ products, uses an activity−based costing system. Information from...
Hopscotch​ Limited, a manufacturer of a variety of​ products, uses an activity−based costing system. Information from its system for the year for all products​ follows: Activity cost pool   Total cost Total activity Assembly $584,900 21,000 machine−hours Inspection $342,000 8,500 inspection−hours Packaging $24,600 1,400 order Hopscotch Limited makes 490 of its product B63 a​ year, which requires a total of 34 machine​ hours, 11 inspection​ hours, and 20 orders. Product B63 requires $45.70 in direct materials per unit and $57.20 in...
Dideda Corporation uses an activity-based costing system with three activity cost pools. The company has provided...
Dideda Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Manufacturing overhead $ 360,000 Selling and administrative expenses 240,000 Total $ 600,000 Distribution of resource consumption: Activity Cost Pools Assembly Setting Up Other Total Manufacturing overhead 25% 65% 10% 100% Selling and administrative expenses 60% 20% 20% 100% The "Other" activity cost pool consists of the costs of idle capacity and...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 30,000 Supervisory expense $ 14,800 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.50 0.40 0.10 Supervisory expense 0.50 0.30 0.20 In the...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 46,000 Supervisory expense $ 12,200 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.50 0.20 0.30 Supervisory expense 0.50 0.10 0.40 In the...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 110,000 Supervisory expense $ 6,900 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.40 0.30 0.30 Supervisory expense 0.40 0.20 0.40 In the...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 35,000 Supervisory expense $ 12,000 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.40 0.30 0.30 Supervisory expense 0.40 0.20 0.40 In the...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing...
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 70,000 Supervisory expense $ 10,700 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.50 0.20 0.30 Supervisory expense 0.50 0.10 0.40 In the...
terling Hotel uses activity-based costing to determine the cost of servicing customers. There are three activity...
terling Hotel uses activity-based costing to determine the cost of servicing customers. There are three activity pools: guest check-in, room cleaning, and meal service. The activity rates associated with each activity pool are $8.50 per guest check-in, $19.00 per room cleaning, and $4.00 per served meal (not including food). Brian Stone visited the hotel for a 5-night stay. Brian had 6 meals in the hotel during the visit. Determine the total activity-based cost for Stone's visit during the month. Round...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT