Answered: The accounting department of a large…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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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		1,029	$	63,800
2	4		310		993		68,900
3	2		302		1,268		64,000
4	1		213		1,028		61,300
5	2		222		984		61,600
6	0		214		712		50,800
7	1		131		762		51,020
8	1		123		739		54,300
9	0		115		708		50,500
10	2		296		1,232		64,800
11	2		213		978		58,000
12	1		222		929		57,500
13	2		217		1,059		62,200
14	2		132		942		54,900
15	4		300		1,299		71,530
16	4		315		1,283		64,800
Totals	30		3,650		15,945	$	959,950

In addition to the 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
Total cost of maintaining customer accounts		109,600
Total cost of performing special analyses		120,000
Total fixed costs (total for 16 months)		550,250
Total costs	$	959,950

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?

1,000 paychecks processed.
200 customer accounts maintained.
3 special analyses.

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