ABC PE 1 Provides most information for utilities cost—buildings

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Presentation transcript:

ABC PE 1 Provides most information for utilities cost—buildings 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

= $4.88 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. $4.88 per square foot c. $3.71 per square foot Step 1- first find all costs Building Maintenance costs- $350,000 for labor and $55,000 for materials and equipment. = $350,000 + $55,000= $405,000 Grounds upkeep- $170,000 for labor, $30,000 for equipment maintenance and $50,000 for supplies. =$170,000 +$30,000 + $50,000= $250,000 Utility costs= $150,000 Total costs = =$805,000 Step 2- find total square feet for all the buildings Company A 8 bldgs * 6,250 sq ft / bldg. = 50,000 Total Sq Ft Company B 7 bldgs * 7,856 sq ft / bldg. = 54,999 Total Sq Ft Company C 12 bldgs * 5,000 sq Ft / bldg. = 60,000 Total Sq Ft Total Square feet = = 164,999 Total Sq Ft Step 3- Allocation rate (slide 21 from class) = Total Cost pool / Total # Driver Units = Total Costs / Total Sq Ft = $805,000 / 164,999 Total Sq Ft = $4.88 per Sq Ft

=$208,704 close enough = $29,815 per bldg. 4. What is the amount of the total overhead cost for Company B assuming all cost are allocated based on the rate method using number of buildings? a. $205,999 b. $176,000 c. $208,705 Step 1- first find all costs (Cost Pool) Building Maintenance costs- $350,000 for labor and $55,000 for materials and equipment. = $350,000 + $55,000= $405,000 Grounds upkeep- $170,000 for labor, $30,000 for equipment maintenance and $50,000 for supplies. =$170,000 +$30,000 + $50,000= $250,000 Utility costs= $150,000 Total costs = =$805,000 Step 2- find the total number of buildings (Driver units) Company A 8 bldgs Company B 7 bldgs Company C 12 bldgs Total Number of Buildings = = 27 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 = = $805,000 / 27 bldgs = # of Driver units used / total # of driver units = $29,815 per bldg. = 7 bldgs / 27 bldgs =0.259259= Proportion rate for Company B Company B= 7 bldgs = $29,815 per bldg. * 7 bldgs. = $208,705 =0.259259 * Total cost =0.259259 * $805,000 =$208,704 close enough