Dane Housecleaning provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Hoium family, requested 45 jobs during the year that required a total of 90 hours of housecleaning. For this service, the client was charged $2,000.Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools. Round off all calculations to the nearest whole cent.b. Using the activity-based costing system, compute the customer margin for the Hoium family. Round off all calculations to the nearest whole cent.c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Hoium family. (Round off all calculations to the nearest whole cent.)

Question

Dane Housecleaning provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Hoium family, requested 45 jobs during the year that required a total of 90 hours of housecleaning. For this service, the client was charged $2,000.Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools. Round off all calculations to the nearest whole cent.b. Using the activity-based costing system, compute the customer margin for the Hoium family. Round off all calculations to the nearest whole cent.c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Hoium family. (Round off all calculations to the nearest whole cent.)

Thomas Ruggio · Accepted Answer

Final Answer :

a.The computation of the activity rates follow:

b.The customer margin for the family is computed as follows:
a.The computation of the activity rates follow: b.The customer margin for the family is computed as follows: The customer margin for the family is computed as follows: c.The margin if all costs are allocated on the basis of cleaning hours:Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total amount of the allocation base = $583,738 ÷ 34,800 hours= $16.77 per hour

The customer margin for the family is computed as follows:
a.The computation of the activity rates follow: b.The customer margin for the family is computed as follows: The customer margin for the family is computed as follows: c.The margin if all costs are allocated on the basis of cleaning hours:Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total amount of the allocation base = $583,738 ÷ 34,800 hours= $16.77 per hour

c.The margin if all costs are allocated on the basis of cleaning hours:Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total amount of the allocation base = $583,738 ÷ 34,800 hours= $16.77 per hour
a.The computation of the activity rates follow: b.The customer margin for the family is computed as follows: The customer margin for the family is computed as follows: c.The margin if all costs are allocated on the basis of cleaning hours:Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total amount of the allocation base = $583,738 ÷ 34,800 hours= $16.77 per hour

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