Explore BrainMass

# 5-39 Account Analysis: Large limousine company cost per unit

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

5-39 Account Analysis

The accounting department of a large limousine company is analyzing the costs of its services. The cost data and level of activity for the past 16 months follow:

Month Special Analyses Customer Accounts Paychecks Processed Accounting Service Costs
1 2 325 1029 \$63,800.00
2 4 310 993 68,900.00
3 2 302 1268 64,000.00
4 1 213 1028 61,300.00
5 2 222 984 61,600.00
6 0 214 712 50,800.00
7 1 131 762 51,020.00
8 1 123 739 54,300.00
9 0 115 708 50,500.00
10 2 296 1232 64,800.00
11 2 213 978 58,000.00
12 1 222 929 57,500.00
13 2 217 1059 62,200.00
14 2 132 942 54,900.00
15 4 300 1299 71,530.00
16 4 315 1283 64,800.00
Totals 30 3650 15945 \$959,950.00

In addition to that above information, you learn that the accounting department had the following total costs for the past 16 months for each of the following:

Total Cost of paychecks processed \$180,100.00
Total cost of maintaining customer accounts 109,600.00
Total cost of performing special analyses 120,000.00
Total fixed cost (total for 16 months) 550,250.00
Total cost \$959,950.00

Required:

A. What is the cost per unit for (1) paychecks processed, (2) customer accounts maintained, and (3) special analyses performed?

B. Assuming the following level of cost-driver volumes for a month, what are the accounting department's estimated costs of doing business using the account analysis approach?
1. 1,000 paychecks processed
2. 200 customer accounts maintained
3. 3 special analyses

#### Solution Preview

See attached file.

Your solution is highlighted in yellow on the attached excel spreadsheet. Click on the cells ...

#### Solution Summary

Your solution is highlighted in yellow on the attached excel spreadsheet. Click on the cells to see the computations. I have calculated a rate for each of the three activities using the 16 month history. I did not round the rate (you can if you wish to re-compute for submitting for credit). I then computed a month's cost by multiplying the activity for the month times the rates and adding in expected fixed cost (1/16 times the amount given).

\$2.19