Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC. E
ID: 2542793 • Letter: D
Question
Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC. ES-5A. Customer Profitability Analysis Hy Standard Services, Inc. provides residential painting services for three home building companies, Alpine, Blue Ridge, and Pineola, and it uses a job costing system for determining the costs for completing each job. The job cost system does not capture any cost incurred by HyStandard for return touchups and refinishes after the homeowner occupies HyStandard paints each house on a square footage contract price, which includes painting as well as Il refinishes and touchups required after the homes are occupied. Each year, the company generates about one-third of its total revenues and gross profits from each of the three builders. The HyStandard owner has observed that the builders, however, require substantially different levels of support follow ing the completion of jobs. The following data have been gathered: Support Activity Major refinishes Cost per Driver Unit $60 $100 $40 Driver Hours on jobs Number of calls Major Refinishes Communication Touchups 150 110 115 Builder Alpine Blue Ridge 35 42 360 205 190 Required Assuming that each of the three customers produces gross profits of S100,000, calculate the profitability from each builder after taking into account the support activity required for each builderExplanation / Answer
Answers
Activities
Major Refirnishes
Touchups
Communications
Total cost allocated (A)
Gross Profits (B)
Revenue (C=A+B)
Profitability (B/C)
Cost per driver (a)
60
100
40
Alpine:
No. of cost drivers (b)
80
150
360
Cost allocated (axb)
$ 4,800.00
$ 15,000.00
$ 14,400.00
$ 34,200.00
$ 1,00,000.00
$ 1,34,200.00
74.52%
Blue Ridge
No. of cost drivers (c )
35
110
205
Cost allocated (axc)
$ 2,100.00
$ 11,000.00
$ 8,200.00
$ 21,300.00
$ 1,00,000.00
$ 1,21,300.00
82.44%
Pineola
No. of cost drivers (d)
42
115
190
Cost allocated (axd)
$ 2,520.00
$ 11,500.00
$ 7,600.00
$ 21,620.00
$ 1,00,000.00
$ 1,21,620.00
82.22%
Activities
Major Refirnishes
Touchups
Communications
Total cost allocated (A)
Gross Profits (B)
Revenue (C=A+B)
Profitability (B/C)
Cost per driver (a)
60
100
40
Alpine:
No. of cost drivers (b)
80
150
360
Cost allocated (axb)
$ 4,800.00
$ 15,000.00
$ 14,400.00
$ 34,200.00
$ 1,00,000.00
$ 1,34,200.00
74.52%
Blue Ridge
No. of cost drivers (c )
35
110
205
Cost allocated (axc)
$ 2,100.00
$ 11,000.00
$ 8,200.00
$ 21,300.00
$ 1,00,000.00
$ 1,21,300.00
82.44%
Pineola
No. of cost drivers (d)
42
115
190
Cost allocated (axd)
$ 2,520.00
$ 11,500.00
$ 7,600.00
$ 21,620.00
$ 1,00,000.00
$ 1,21,620.00
82.22%
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