US weygandt, Accounting Principles, 12e Assignment LL SCREEN RCES Exercise 24-S
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US weygandt, Accounting Principles, 12e Assignment LL SCREEN RCES Exercise 24-S Rensing Groomers is in the do g-grooming business. Its operating costs are described by the following formulas Grooming supplies (variable) Direct labor (variable) Overhead (mixed) y $0$14x y $9,100 +$2x tudy Milo, the owner, has determined that direct labor is the cost driver for all three categories of costs. Prepare a flexible budget for activity levels of 510, 580, and 690 direct labor hours. (List variable co sts before fixed costs.) ERS All Rights Reserved. A Division of e anythingExplanation / Answer
Rensing Groomers
Rensing Groomers
Flexible Budget
Activity Level - Direct labor hours (DLH)
510
580
690
Variable costs:
Grooming Supplies at $5 per DLH
$2,550
$2,900
$3,450
Direct labor at $14 per DLH
$7,140
$8,120
$9,660
Overhead at $2 per DLH
$1,020
$1,160
$1,380
Total variable cost at $21 per DLH
$10,710
$12,180
$14,490
Fixed costs:
Overhead
$9,100
$9,100
$9,100
Total fixed cost
$9,100
$9,100
$9,100
Total Cost
$19,810
$21,280
$23,590
Activity Level - Direct labor hours
510
580
690
Total cost
$19,810
$21,280
$23,590
Total cost per DLH
$38.84
$36.69
$34.19
Note – The total cost per DLH = total cost/direct labor hours
For instance, total cost per DLH at activity level of 580 DLH = $21,280/580 = $36.69
Normal activity level per month – 620 DLH
Groomer hours per job = 1.3 DLH
Profit % = 35% of costs
Total cost equation, = $5x + $14x +9,100 + $2x
= $21x + $9,100
Total cost for 620 DLH = $21 x 620 + $9,100 =$13,020 +$9,100
Total cost for 620 DLH = $22,120
Total cost per DLH = $22,120/620 = $35.68
DLH per pet groomer = 1.3 DLH
Total cost per pet groomer = 1.3 x $35.68 = $46.38
Add: profit at 35% = $16.23
Charge per each pet groomer = $62.61
Rensing Groomers
Flexible Budget
Activity Level - Direct labor hours (DLH)
510
580
690
Variable costs:
Grooming Supplies at $5 per DLH
$2,550
$2,900
$3,450
Direct labor at $14 per DLH
$7,140
$8,120
$9,660
Overhead at $2 per DLH
$1,020
$1,160
$1,380
Total variable cost at $21 per DLH
$10,710
$12,180
$14,490
Fixed costs:
Overhead
$9,100
$9,100
$9,100
Total fixed cost
$9,100
$9,100
$9,100
Total Cost
$19,810
$21,280
$23,590
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