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

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

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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