(a) Patrick Payroll Services provides weekly payroll processing for a number of

Question

(a)

Patrick Payroll Services provides weekly payroll processing for a number of small businesses. Patrick Talbert, the company’s owner, has been using an activity-based costing system for several years. He used the following information in preparing this year’s budget.
Activity Cost Pool Total Cost Cost Driver Expected Driver Volume Setting up new employees $ 80,000 Number of new employees 500 Processing weekly payroll $ 724,735 Number of paychecks printed 2,506,000 Weekly reporting $ 320,000 Number of clients 100 Annual tax reporting $ 251,200 Number of W-2s printed 62,800

Explanation / Answer

Cost rates for each activity pool:

Cost Cost driver Expected driver volume Cost rates Setting up new employees $ 80,000 Number of new employees 500 $ 160 Processing weekly payroll $ 724,735 Number of paychecks printed 2,506,000 $ 0.29 Weekly reporting $ 320,000 Number of clients 100 $ 3,200 Annual tax reporting $ 251,200 Number of W-2s printed 62,800 $ 4

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