Calculating costs using traditional and activity-based systemsBubba and Danny are college friends planning a skiing trip to Killington before the new year. They estimated the following for the trip:RequirementsBubba suggests that the costs be shared equally. Calculate the amount each person would pay.Danny does not like the idea of sharing the costs equally because he plans to stay in the room rather than ski. Danny suggests that each type of cost be allocated to each person based on the above-listed allocation bases. Using the activity allocation for each person, calculate the amount that each person would pay based on his own consumption of the activity. Activity AllocationEstimatedAllocation BasePounds of food eatenNumber of lift ticketsNumber of nightsBubbaDannyCostsFood2426$ 400300SkiingLodging280$ 9802.

1. Cost allocated to B = $980*1/2 = $490 Cost allocated to D = $980*1/2 = $490

Answered: Activity Allocation Estimated…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter27: Lean Manufacturing And Activity Analysis

Section: Chapter Questions

Problem 18E: Cost of quality and value-added/non-value-added reports for a service company A. Using the...

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Calculating costs using traditional and activity-based systems

Bubba and Danny are college friends planning a skiing trip to Killington before the new year. They estimated the following for the trip:

Requirements

Bubba suggests that the costs be shared equally. Calculate the amount each person would pay.
Danny does not like the idea of sharing the costs equally because he plans to stay in the room rather than ski. Danny suggests that each type of cost be allocated to each person based on the above-listed allocation bases. Using the activity allocation for each person, calculate the amount that each person would pay based on his own consumption of the activity.

Activity Allocation
Estimated
Allocation Base
Pounds of food eaten
Number of lift tickets
Number of nights
Bubba
Danny
Costs
Food
24
26
$ 400
300
Skiing
Lodging
280
$ 980
2.

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