Question

Onassis Catering is a Greek company that provides passenger and crew meals to airlines operating out of two international airports in Athens and Corfu. The operations at the two airports are managed separately, and top management believes that there may be benefits to greater sharing of information between the two operations.

To better compare the two operations, an ABC system has been designed with the active participation of the managers at both airports. The ABC system is based on the following activity cost pools and activity measures:

Activity Cost Pool	Activity Measure
Meal preparation	Number of meals
Flight-related activities	Number of flights
Customer service	Number of customers
Other (costs of idle capacity and      organization-sustaining costs)	NA

The operation at Athens International Airport (AIA) serves 1 million meals annually on 5,000 flights for 10 different airlines. (Each airline is considered one customer.) The annual cost of running the AIA airport operation, excluding only the costs of raw materials for meals, totals €3,743,300. Note : The currency in Greece is the euro, denoted by €.

Annual Cost of the AIA Operation
Cooks and delivery personnel wages	€	3,040,000
Kitchen supplies		37,800
Chef salaries		231,000
Equipment depreciation		79,000
Administrative wages and salaries		197,500
Building costs		158,000
Total cost	€	3,743,300

To help determine the activity rates, employees were interviewed and asked how they divided their time among the four major activities. The results of employee interviews at AIA are displayed below:

	Distribution of Resource Consumption across Activities at the AIA Operation
	Meal Preparation			Flight- Related			Customer Service			Other			Total
Cooks and delivery personnel wages		75	%		20	%		0	%		5	%		100	%
Kitchen supplies		100	%		0	%		0	%		0	%		100	%
Chef salaries		35	%		20	%		40	%		5	%		100	%
Equipment depreciation		65	%		0	%		0	%		35	%		100	%
Administrative wages and salaries		0	%		25	%		50	%		25	%		100	%
Building costs		0	%		0	%		0	%		100	%		100	%

Required:

1. Perform the first-stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.)

2. Compute the activity rates for the activity cost pools. (Round your activity rates for meal preparation to 4 decimal places and flight-related to 2 decimal places. Do not leave any empty spaces; input a 0 wherever it is required.)

Answer 1

Answer

• Requirement 1

	Meal Preparation	Flight Related	Customer Service	Other	Totals
Cooks & delivery personnel wages	€2,280,000	€608,000	€0	€152,000	€3,040,000
Kitchen supplies	€37,800	€0	€0	€0	€37,800
Chef salaries	€80,850	€46,200	€92,400	€11,550	€231,000
Equipment depreciation	€51,350	€0	€0	€27,650	€79,000
Administrative wages & salaries	€0	€49,375	€98,750	€49,375	€197,500
Building costs	€0	€0	€0	€158,000	€158,000
Total Cost	€2,450,000	€703,575	€191,150	€398,575	€3,743,300

• Requirement 2

	Overhead cost	Activity Driver		Activity rates
Meal Preparation	€2,450,000	1000000	no. of meals	€              2.4500	per meal
Flight Related	€703,575	5000	flights	€              140.72	per flight
Customer Service	€191,150	10	airlines	€              19,115	per airline
Other	€398,575	NA
Total	€3,743,300