ABC PE 3 1. What is the best cost driver for overhead cost related to the utilities portion? a. Number of buildings b. Number of vehicles c. Number.

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Presentation transcript:

ABC PE 3 1. What is the best cost driver for overhead cost related to the utilities portion? a. Number of buildings b. Number of vehicles c. Number of square footage of each building Provides most information for utilities cost—buildings can be different sizes 2. Which of the following are the cost objects for allocating overhead costs? a. Units b. Vehicles c. Buildings Cost Object = The product, service, or object that created the costs

= $355,752 is the cost for Company A = $6.48 per Sq Ft 3. What is the allocation rate assuming all costs are allocated based on building square footage? a. $1.76 per square foot b. $6.48 per square foot c. $5.71 per square foot Step 1- first find all costs Building Maintenance costs- $370,000 for labor and $65,000 for materials and equipment. = $370,000 + $65,000= $435,000 Grounds upkeep- $200,000 for labor, $30,000 for equipment maintenance and $50,000 for supplies. =$200,000 +$30,000 + $50,000= $280,000 4. Using the rate that you found in question 3, how much would the cost be for Company A? a. $355,752 b. $252,720 c. $356,400 Utility costs= $250,000 Total costs = =$965,000 Step 2- find total square feet for all the buildings Company A 9 bldgs * 6,100 sq ft / bldg. = 54,900 Total Sq Ft Company B 5 bldgs * 7,800 sq ft / bldg. = 39,000 Total Sq Ft Company C 10 bldgs * 5,500 sq Ft / bldg. = 55,000 Total Sq Ft Total Square feet = = 148,900 Total Sq Ft Step 3- Allocation rate (slide 21 from class) Step 4- Company A has 54,900 SQ FT = Total Cost pool / Total # Driver Units The allocation rate is $6.48 per Sq ft = Total Costs / Total Sq Ft =54,900 SQ Ft * $6.48 per Sq ft= = $965,000 / 148,900 Total Sq Ft = $355,752 is the cost for Company A = $6.48 per Sq Ft

=$402,115 close enough (rounding) 5. What is the amount of the total overhead cost for Company C assuming all cost are allocated based on using the number of buildings? a. $361,872 b. $201,040 c. $402,080 Step 1- first find all costs (Cost Pool) Building Maintenance costs- $370,000 for labor and $65,000 for materials and equipment. = $370,000 + $65,000= $435,000 Grounds upkeep- $200,000 for labor, $30,000 for equipment maintenance and $50,000 for supplies. =$200,000 +$30,000 + $50,000= $280,000 Utility costs= $250,000 Total costs = =$965,000 Step 2- find the total number of buildings (Driver units) Company A 9 bldgs Company B 5 bldgs Company C 10 bldgs Total Number of Buildings = = 24 bldgs Step 3- Allocation rate = (slide 21 from class) Total Cost pool / Total # Driver Units Step 3 alternate solution (proportion method) – (slide 21 from class) Total Costs / Total number of bldgs Proportion method = = $965,000 / 24 bldgs = # of Driver units used / total # of driver units = $40,208 per bldg. = 10 bldgs / 24 bldgs =0.4167= Proportion rate for Company B Company C= 10 bldgs = $40,208 per bldg. * 10 bldgs = $402,080 =0.4167 * Total cost =0.4167 * $965,000 =$402,115 close enough (rounding)