The Coletti Cleaning Brigade Company provides housecleaning services to its c or

Question

The Coletti Cleaning Brigade Company provides housecleaning services to its c orovided the following data from its activity-based costing system. I4. company uses an activity-based costing system for its overhead costs. The company has Activity Cost Pool Total Cost Cleaning. Job support Client support. Other.150.000 Total Activity S302,993 43.100 hours 79,100 5,000 jobs 3.348 180 clients Not applicable Total 5535.441 The "Other" activity cost pool consists of the costs of idle capacity and organization- sustaining costs. One particular client, the Tubman family, requested 26 jobs during the year that required a total of 104 hours of housecleaning. For this service, the client was charged $1,420. a. Using the activity-based costing system, compute the customer margin for the Tubman family. Round off all calculations to the nearest whole cent. b. Assume the company decides instead to use a traditional costing system in which costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Tubman family. Round off all calculations to the nearest whole cent. Computations for costs:

Explanation / Answer

a) First we calculate the cost per activity

Now, we allocate the overheads to the client a sper ABC costing

b) If the company uses traditional costing, the overhead allocation rate on the basis of cleaning hours will be calculated.

Pre determine overhead allocation rate = total overhead cost / total cleaning hours

= 535441 / 43100

= $12.42

Overhead allocated to Tubman family = 12.42 * 104

= $1292.02

Customer marign

Activity cost pool Total cost total activity Cost per activity Cleaning $3,02,993 $43,100 $7.03 Job suppport $79,100 $5,000 $15.82 Client support $3,348 $180 $18.60 Other $1,50,000 NA NA Total $5,35,441

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