Huddleston Housecleaning provides housecleaning services to its clients. Compute the activity rates, activity-based costing system, traditional costing system . Assume the company decides instead to use a traditional costing system in which ALL (including the $110,000 other) costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Lumbard family. Round off all calculations to the nearest whole cent.
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Huddleston 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.
Activity Cost Centers Overhead Cost Allocation Base/Cost Driver
Cleaning $645,576 72,700 hours
Job support $129,546 5,400 jobs
Client support $ 20,900 760 clients
Other $110,000 Not applicable
Total $906,022
The "Other" activity cost center consists of the costs of idle capacity and organization-sustaining costs. Do not allocate these costs to the jobs.
One particular client, the Lumbard family, requested 31 jobs during the year that required a total of 62 hours of housecleaning. For this service, the client was charged $1,620
Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the 3 activity cost centers. Round all calculations to the nearest whole cent.
b. Using the activity-based costing system, compute the customer margin for the Lumbard family client. (Note that the Lumbard family is one of 760 clients.) Round all calculations to the nearest whole cent.
c. Assume the company decides instead to use a traditional costing system in which ALL (including the $110,000 other) costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Lumbard family. Round off all calculations to the nearest whole cent.
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