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 $12.70 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 cast 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 (008) Kilometres driven Number of jobs Activity for the Year 43,600 hundred square metres 25.350 kilometres 200 jobs None NA The total cost of operating the company for the year is $532,500, which includes the following costs: Wages Supplies Snow removal equipment depreciation Vehicle expenses office expenses President's compensation $207,000 49,500 29.500 49,500 79,000 118.000 Total cost $532,500 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption across Activity Cost Pools Snow Removal 70% 100% 80% Travel to Jobs 206 Job Support 06 Other 101 08 Wages Supplies Snow removal equipment depreciation Vehicle expenses office expenses President's compensation Total 1005 1005 1005 100$ 1003 1005 70% 20% 305 603 553 06 08 408 0% 0 % 45% Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.) Snow Removal Travel to Jobs Job Support Other Total Wages Supplies Snow removal equipment depr. Vehicle expenses Office expenses President's compensation Total cost S 0S 0S 0S 0S 0

Please show calculations. Thanks.

Answer 1

1
	Snow removal	Travel to Jobs	Job support	Other	Total
Wages	144900	41400	0	20700	207000
Supplies	49500	0	0	0	49500
Snow removal equipment depreciation	23600	0	0	5900	29500
Vehicle expenses	0	34650	0	14850	49500
Office expense	0	0	31600	47400	79000
President’s compensation	0	0	53100	64900	118000
Total cost	218000	76050	84700	153750	532500
2
Activity Cost Pool	Activity Rate
Snow removal	5.00	per hundred square metres	=218000/43600
Travel to jobs	3.00	per kilometre	=76050/25350
Job support	423.50	per job	=84700/200
3
Activity Cost Pool	ABC cost
Snow removal	270.00	=54*5.00
Travel to jobs	282.00	=94*3.00
Job support	423.50
Total	975.50
4
Sales		685.80
Costs:
Cleaning carpets	270.00
Travel to jobs	282.00
Job support	423.50	975.50
Product margin		-289.70

Workings for 1:
	Snow removal	Travel to Jobs	Job support	Other
Wages	=207000*70%	=207000*20%	0	=207000*10%
Supplies	49500	0	0	0
Snow removal equipment depreciation	=29500*80%	0	0	=29500*20%
Vehicle expenses	0	=49500*70%	0	=49500*30%
Office expense	0	0	=79000*40%	=79000*60%
President’s compensation	0	0	=118000*45%	=118000*55%