Question

The Chemical Free Clean Co ( C Co) provides a range of environmentally - friendly cleaning needs. Its services to business customers range from large, medium sized and small offices and factotn words at hospitals, where specialist cleaning equipment must be usicad a For xample.ll their range customers, often providing a specific service to meet a clients to specialist care adhered to C Co offers both regular cleaning contracts and contracts for one-off jobs. client was a chain of restaurants which employed them to provide an business premises after an outbreak of food poisoning. One of C Co's at ranches. For this service, the company has always charged a flat fee per is some questio carpet cleaned. The current fee is RM28 per hundred meters. However, there customers- about whether the company is actually making any money on jobs tor used and regulations a its latest extensive clean of all ther service is carpet eleaning particularly those located on remote ranches that required considerable director, has suggested investigating this question using activity- discussion, a simple system consisting of four activity cost pools activity cost pools and their activity measures appear below travel time. The finance based costing. After some seemed to be adequate. The Activity Cost Pool Cleaning carpets Travel to jobs Aetivity mensure Meters cleaned (00s) Kms driven Number of jobs Activity for the Year 20,000 hundred meters 60,000 Kms Job support 2,000 jobs Job support consists of receiving calls from potential customers at the home office, scheduling jobs. billing, resolving issues, and so on. The total cost of operating the company for the year is $430,000, which includes the following costs RM135.000 Wages 40,000 16,000 48,000 es. Cleaning equipment depreciation 27,000 32,000 President's compensation... RM298,000

Answer 1

Requirement i) Calculate the activity rates for each activity based on activity cost drivers Activity Cost Activity Cost Drivers Activity rate Calculation RM 8.05 per Cleaning Carpets Travel to jobs Job support RM 161,000 20,000 hundred metres hundred metres 161,000/20,000 RM 78,000 RM 59,000 2,000 jobs 60,000 kms RM 1.3 per km 78,000/60,000 RM 29.2 per job 59,000/2,000 Requirement ii) Calculation of total cost for N- Ranch using ABC rates Activity Cost Assigned (in RM) Activity Cleaning Carpets Job support Calculation Activity rate RM 8.05 per hundred metres RM 1.3 per km RM 29.2 per job consumed 500 metres 75 kms 1 job 40.3 5 8.05 97.5 75 1.3 29.2 129.2 167 2Travel to jobs Total The Total ABC CostRM 167 (40.3+98.5+29.2)