Question

WD Imagine Inc. has three locations in Canada: Vancouver, Toronto and Montreal. The company develops and maintains web-designs for medium size companies. Management of Vancouver office is concerned about the cost of handling web-related matters.

WD Imagine Vancouver Office has provided the following data for the year 2019:

Junior web-designers salaries          $ 280,000

Senior web-designers salaries            $ 320,000

Office manager salary                        $ 120,000

WD accountant believes that apart from salaries all other expenses are fixed costs and cannot be meaningfully assigned to individual job.

The employees of WD-Vancouver Office have prepared the following table that shows how their time was distributed last year across the two activities

Employee group	Developing complex web-design jobs	Routine web-design maintenance jobs	Other	Total
Junior web-designers Wages	50%	40%	10%	100%
Senior web-designers wages	40%	30%	30%	100%
Office manager salary	5%	20%	75%	100%

Jobs at Vancouver office during 2019 were as follows:

Activity	Total Activity at Vancouver branch
Developing complex web-design	100 Jobs
Routine web-design maintenance	800 jobs

The costs relating to these activities for Toronto office are listed below:

Activity	Cost per Activity for Toronto Bank
Developing complex web-design	$ 3,000 per job
Routine web-design maintenance jobs	$ 200 per job

Required:

a. Compute Vancouver office activity rates for developing complex wed-design AND Routine web-design jobs. (14 marks)

b. Compare the Vancouver results to that of Toronto Office. Suggest two possible reason for the discrepancies noted in each activity rate: complex wed-design AND Routine web-design jobs. (ie 4 in total). (4 marks)

Answer 1

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WD Imagine Inc.
Answer a
Particulars	Developing complex web-design jobs	Routine web-design maintenance jobs
Junior web-designers Wages	50%	40%
Junior web-designers salaries	280,000.00	280,000.00
Allocation	140,000.00	112,000.00
Senior web-designers wages	40%	30%
Senior web-designers salaries	320,000.00	320,000.00
Allocation	128,000.00	96,000.00
Total cost	268,000.00	208,000.00
Number of jobs	100.00	800.00
Rate per job	2,680.00	260.00
Answer b	Vancouver office	Toronto office	Difference
Developing complex web-design jobs	2,680.00	3,000.00	(320.00)
Routine web-design maintenance jobs	260.00	200.00	60.00

Reason:

Rate of allocation by Vancouver office is not corrected. It should recheck the % of service allotted to each job.

It should perform more jobs of complex web design to lower the per job rate.