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 $11.60 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 organization-sustaining costs) Activity Measure Square metres cleaned (05) Kilometres driven Number of jobs Activity for the Year 42,050 hundred square metres 16.875 kilometres 400 jobs None The total cost of operating the company for the year is $465.000, which includes the following costs: Wages Supplies Snow removal equipment depreciation Vehicle expenses office expenses President's compensation $180,000 45,000 25,000 45,000 70.000 100,000 Total cost $465,000 Resource consumption is distributed across the activities as follows:

Answer 1

1.
	Snow Removal	Travel to Jobs	Job Support	Other	Total
Wages	$144,000	$18,000	$0	$18,000	$180,000
Supplies	$45,000		$0	$0	$45,000
Snow removal equip depreciation	$21,250		$0	$3,750	$25,000
Vehicle expenses	$0	$29,250	$0	$15,750	$45,000
Office expenses	$0	$0	$31,500	$38,500	$70,000
President's compensation	$0	$0	$35,000	$65,000	$100,000
	$210,250	$47,250	$66,500	$141,000	$465,000
2.
	Total Costs	Activity	Cost per uni
Snow Removal	$210,250	42,050	$5.00
Travel to Jobs	$47,250	16,875	$2.80
Job Support	$66,500	400	$166.25
	$324,000
3.
	Activity Driver	Cost per uni	Activity Cosy
Snow Removal	4,500	5.00	22,500.00
Travel to Jobs	85	2.80	238.00
Job Support	1	166.25	166.25
4'
Sales	52,200.00
Cost:
Snow Removal	22,500.00
Travel to Jobs	238.00
Job Support	166.25
Product margin	29,295.75