Question

Grenier & Company is an architectural firm specializing in home remodeling for private clients and new Ann Lalonde hired Grenier to design her kitchen remodeling A total of 25 professional hours were incurred office buildings for corporate clients. Grenier charges customers at a biling rate equal to 128% of the on this job. In addition, Lalonde's remodeling job required one of the professionals to travel back and forth client's total job cos. A client's totaljob cost is a combination of (1) professional time spent on the dient to her house for a total of 145 mies. The blueprints had to be copied four times because Lalonde changed (561 per hour cost of employing each professional) and (2) operating overhead allocated to the client's job the plans several times. In addition, 20 hours of secretarial time were usedlining up the subcontractors for Grenier allocates operating overhead to jobs based on professional hours spent on the job. Gre the job estimates its five professionals will incur a total of 10.000 professional hours working on client jobs during Read the requirements Click the icon to view the operating cost information) the year Requirement 1. Calculate the current indirect cont location rate per professional bour. (Round your answer to the nearest cent) The current indirect cout allocation rato per professional hour is $ Requirements - X 1. Calculate the current indirect cost alocation rate per professional hour 2. Calculate the total amount that would be bled to Lalonde given the current costing structure 3. Calculate the activity cost location rates that could be used to allocate operating overhead costs to dienos 4. Calculate the amount that would be billed to Lalonde using ABC costing 5. Which type of biling system is more for to clients? Explain Enter any number in the edit fields and then click Check Answer parts

Answer 1

1. Current Indirect Cost Allocation Rate Per Professional Hour

Professional Time Cost = 61 Per Hour Per Professional

Operating Cost = 5.02 Per Hour Per Professional (= 251000 / 10000 / 5 = 5.02)

Total = 65.02 Per Hour Per Professional

2. Total Bill amount of Lalonde under Current Costing

Total Cost = 1625.5 (= 25 Hours * 65.02 Per Hour)

Total Bill Amount = 2080.64 (=1625.5*128%)

3. Activity Cost Allocation Rate

Acivity Cost Allocation Rates
Acivity	Cost	Total Usage by Corporate Clients	Total Usage by Private Clients	Total Usage	Cost Driver Ratio of Corporate Client	Cost Driver Ratio of Private Client
Transport	6000	2000	13000	15000	0.133333333	0.866666667
Blueprint	30000	450	550	1000	0.45	0.55
Office Support	215000	2300	2700	5000	0.46	0.54
Total	251000

4. Bill Amount to Lalonde as per ABC

Professional Time cost = 1525 (= 25 hours * 61 per hour)

Transport Cost = 125.67 (= 145 Miles * 0.866)

Blueprint Cost = 2.2 ( = 4 Copies * 0.55)

Office Support Cost =  10.8 ( = 20 Hours * 0.54)

Total Cost = 1663.67

Total Bill Amount = 2129.50 ( = 1663.67 *128 %)

5. Currect Cost Structure will be more fair to clients as cost under ABC is more as compared to current cost structure.