Question

The accounting department of a large limousine company is analyzing the costs of its services. The cost data and level of activity for the past 16 months follow:

Month	Special Analyses		Customer Accounts			Paychecks Processed			Accounting Service Costs
1	0			150			1,270		$	60,600
2	4			150			1,020			61,000
3	4			260			1,290			59,700
4	3			320			1,200			59,200
5	3			180			910			60,300
6	3			210			970			60,600
7	3			310			1,210			61,200
8	4			220			1,000			61,900
9	1			340			990			60,600
10	3			240			1,250			59,900
11	1			210			850			59,900
12	3			340			1,030			59,000
13	1			160			1,100			58,200
14	1			220			890			61,200
15	0			170			1,250			60,800
16	0			200			920			58,500
Totals	34			3,680			17,150		$	962,600

In addition to the above information, you learn that the accounting department had the following total costs for the past 16 months for each of the following:

Total cost of paychecks processed	$	190,365
Total cost of maintaining customer accounts		111,136
Total cost of performing special analyses		133,620
Total fixed costs (total for 16 months)		527,479
Total costs	$	962,600

Required:

a-1. What is the cost per unit for paychecks processed? (Round your answer to 2 decimal places.)

a-2. What is the cost per unit for customer accounts maintained? (Round your answer to 2 decimal places.)

a-3. What is the cost per unit for special analyses performed?

b. Assuming the following level of cost-driver volumes for a month, what are the accounting department's estimated costs of doing business using the account analysis approach? (Round "Unit cost" to 2 decimal places. Round "Average fixed cost" to the nearest whole dollar amount.)

• 960 paychecks processed.

• 170 customer accounts maintained.

• 3 special analyses.

Answer 1

Large Limousine Requirement a.1,a.2, a.3. Activity Total cost : Volume Process paychecks ($190,365 + 17,150 checks) Maintain customer accounts ($111,136 +3,680 accounts) Perform special analyses ($133,620 + 34 analyses) Unit Cost 11.1 30.2 3930 Requirement b The average fixed costs for a month are $32,967 (= $527,479 + 16 months). For 960 checks, 170 accounts, and 3 analyses, the estimated cost is: $60,547 = $32,967 +960 x $11.10) + (170 x $30.20) + (3 x $3,930.00).