Solutions -- Week 5

Solutions -- Week 5 - WEEK CLS DATES [M-W] 5 DATES [T-Th]...

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GNB Problem Solutions – Week-by-Week page 1 of 13 WEEK 5 GNB ASSIGNED PROBLEM SOLUTIONS BUAD 250B – FALL 2009 CLS DATES [M-W] DATES [T-Th] TOPICS READINGS ASSIGNMENTS [TO BE COMPLETED BY DATE ASSIGNED] 8 Sep 21 Sep 22 Activity-Based Costing Cost Behavior & Analysis Ch. 8 Ch. 5 PR: 8-17 In-class: 8-18 9 Sep 23 Sep 24 Cost Behavior & Analysis Ch. 5 Appx. 5A (read only) BE: 5-1, 3, 4, 8 PR: 8-19; 5-12, 14 In-class: 5-18 Intro: Ch. 6 Problem 8-17 1. The first-stage allocation of costs to activity cost pools appears below: Distribution of Resource Consumption Across Activity Cost Pools Cleaning Carpets Travel to Jobs Job Support Other Total Wages . ............................................. 70% 20% 0% 10% 100% Cleaning supplies . ........................... 100% 0% 0% 0% 100% Cleaning equipment depreciation . ... 80% 0% 0% 20% 100% Vehicle expenses . ........................... 0% 60% 0% 40% 100% Office expenses . .............................. 0% 0% 45% 55% 100% President’s compensation . .............. 0% 0% 40% 60% 100% Cleaning Carpets Travel to Jobs Job Support Other Total Wages . .............................................. $105,000 $30,000 $ 0 $ 15,000 $150,000 Cleaning supplies . ............................ 40,000 0 0 0 40,000 Cleaning equipment depreciation . .... 16,000 0 0 4,000 20,000 Vehicle expenses . ............................ 0 48,000 0 32,000 80,000 Office expenses . ............................... 0 0 27,000 33,000 60,000 President’s compensation . ............... 0 0 32,000 48,000 80,000 Total cost . ......................................... $161,000 $78,000 $59,000 $132,000 $430,000 Example: 70% of $150,000 = $105,000 Other entries in the table are determined in a similar manner. 2. The activity rates are computed as follows: Activity Cost Pool (a) Total Cost (b) Total Activity (a) ÷ (b) Activity Rate Cleaning carpets . ............. $161,000 20,000 hundred square feet $8.05 per hundred square feet Travel to jobs . .................. $78,000 60,000 miles $1.30 per mile Job support . ..................... $59,000 2,000 jobs $29.50 per job
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GNB Problem Solutions – Week-by-Week page 2 of 13 3. The cost for the Flying N Ranch job is computed as follows: Activity Cost Pool (a) Activity Rate (b) Activity (a) × (b) ABC Cost Cleaning carpets . ............. $8.05 per hundred square feet 5 hundred square feet $ 40.25 Travel to jobs . .................. $1.30 per mile 75 miles 97.50 Job support . ..................... $29.50 per job 1 job 29.50 Total . ................................ $167.25 4. The margin earned on the job can be easily computed by using the costs calculated in part (3) above. Sales . ....................................... $140.00 Costs: Cleaning carpets . ................. $40.25 Travel to jobs . ....................... 97.50 Job support . ......................... 29.50 167.25 Margin . ..................................... $(27.25 ) 5. Gallatin Carpet Cleaning appears to be losing money on the Flying N Ranch job. However, caution is advised.
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This note was uploaded on 11/14/2010 for the course BUAD 250B taught by Professor Jackson during the Spring '07 term at USC.

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Solutions -- Week 5 - WEEK CLS DATES [M-W] 5 DATES [T-Th]...

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