Explore BrainMass

Explore BrainMass

    Activity based costing (calculating customer margin)

    Not what you're looking for? Search our solutions OR ask your own Custom question.

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

    The Thornes Cleaning Brigade Company 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 Pool Total Cost Total Activity
    Cleaning $274,170 48,100 hours
    Job support $ 99,066 5,700 jobs
    Client support $9.796 620 clients
    Other $110,000 Not applicable
    Total $493,032

    The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.

    One particular client, the Lazzara family, requested 37 jobs during the year that required a total of 222 hours of housecleaning. For this service, the client was charged $2,350

    Required:
    a. Using the activity-based costing system, compute the customer margin for the Lazzara family. Round off all calculations to the nearest whole cent.
    b. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of cleaning hours. Compute the margin for the Lazzara family. Round off all calculations to the nearest whole cent

    © BrainMass Inc. brainmass.com December 24, 2021, 7:46 pm ad1c9bdddf
    https://brainmass.com/business/product-costing/activity-based-costing-calculating-customer-margin-217357

    Solution Preview

    The Thornes Cleaning Brigade Company 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 Pool Total Cost Total Activity
    Cleaning $274,170 48,100 hours
    Job support $ 99,066 5,700 jobs
    Client support $9.796 620 clients
    Other $110,000 Not applicable
    Total $493,032

    The "Other" activity cost pool consists of the costs of ...

    Solution Summary

    The solution explains how to calculate the customer margin using activity based costing

    $2.49

    ADVERTISEMENT