Kenosha Winter Services is a small family-owned snow-removal business. For its s
ID: 2593867 • Letter: K
Question
Kenosha Winter Services is a small family-owned snow-removal business. For its services, the company has always charged a flat fee per hundred square metres of snow removal. The current fee is $11.55 per hundred square metres. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on more remote properties that require considerable travel time. The owner's daughter, home from school for the summer, has suggested investigating this question using ABC. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below Activity Cost Pool Snow removal Travel to jobs Job support Other (costs of idle capacity and Activity Measure Activity for the Year Square metres cleaned (00s) Kilometres driven Number of jobs 40,720 hundred square metres 20,000 kilometres 250 jobs organization-sustaining costs) None NA The total cost of operating the company for the year is $450,000, which includes the following costs Wages Supplies Snow removal equipment depreciation Vehicle expenses Office expenses Presidents compensation $174,000 44,000 24,000 44,000 68,000 96,000 Total cost $450,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Activity Cost Pools Snow Travel Job Removal to Jobs Support Other Total 20 F3 FS @EExplanation / Answer
Solution:
1.First Stage Allocation of Cost:
Particulars
Snow Removal
Travel to Jobs
Job Support
Other
Total
Wages
139,200
17,400
-
17,400
174,000
Supplies
44,000
-
-
-
44,000
Snow Removal Equipment Depreciation
20,400
-
-
3,600
24,000
Vehicle Expenses
-
28,600
-
15,400
44,000
Office Expenses
-
-
30,600
37,400
68,000
President's compensation
-
-
33,600
62,400
96,000
Total
203,600
46,000
64,200
136,200
450,000
2.Activity Rate
Activity Cost Pool
Total Cost
Activity for the Year
Activity Rate
Snow Removal
203,600
40720 hundred Sq meter
5.00
Travel to Jobs
46,000
20000 Kms
2.30
Job Support
64,200
250 Jobs
256.80
3.Activity Cost for Job at Home Town Hardware
Activity Cost Pool
Activity
Activity Rate
Activity Cost
Snow Removal
43 hundred sq meter
5
215.00
Travel to Jobs
83 Kms
2.3
190.90
Job Support
1 Job
256.8
256.80
Total
662.70
4.Margin from Hometown Hardware Job
Particulars
Details
Amount
Sales
496.65
Cost:
Snow Removal
215.00
Travel to Jobs
190.90
Job Support
256.80
662.70
Product Margin
(166.05)
1.First Stage Allocation of Cost:
Particulars
Snow Removal
Travel to Jobs
Job Support
Other
Total
Wages
139,200
17,400
-
17,400
174,000
Supplies
44,000
-
-
-
44,000
Snow Removal Equipment Depreciation
20,400
-
-
3,600
24,000
Vehicle Expenses
-
28,600
-
15,400
44,000
Office Expenses
-
-
30,600
37,400
68,000
President's compensation
-
-
33,600
62,400
96,000
Total
203,600
46,000
64,200
136,200
450,000
2.Activity Rate
Activity Cost Pool
Total Cost
Activity for the Year
Activity Rate
Snow Removal
203,600
40720 hundred Sq meter
5.00
Travel to Jobs
46,000
20000 Kms
2.30
Job Support
64,200
250 Jobs
256.80
3.Activity Cost for Job at Home Town Hardware
Activity Cost Pool
Activity
Activity Rate
Activity Cost
Snow Removal
43 hundred sq meter
5
215.00
Travel to Jobs
83 Kms
2.3
190.90
Job Support
1 Job
256.8
256.80
Total
662.70
4.Margin from Hometown Hardware Job
Particulars
Details
Amount
Sales
496.65
Cost:
Snow Removal
215.00
Travel to Jobs
190.90
Job Support
256.80
662.70
Product Margin
(166.05)
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