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Activity-based costing for a service business Sterling Hotel uses activity-based costing to determine the cost of servicing customers. There are three activity pools: guest check-in, room cleaning, and meal service. The activity rates associated with each activity pool are $8 per guest check-in, $25 per room cleaning, and $4 per served meal (not including food). Ginny Campbell visited the hotel for a three-night stay. Campbell had three meals in the hotel during her visit. Determine the total activity-based cost for Campbell’s visit.

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 26, Problem 26.5BPE
Textbook Problem
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Activity-based costing for a service business

Sterling Hotel uses activity-based costing to determine the cost of servicing customers. There are three activity pools: guest check-in, room cleaning, and meal service. The activity rates associated with each activity pool are $8 per guest check-in, $25 per room cleaning, and $4 per served meal (not including food). Ginny Campbell visited the hotel for a three-night stay. Campbell had three meals in the hotel during her visit. Determine the total activity-based cost for Campbell’s visit.

To determine

Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).

To compute: The activity-cost allocated for C’s visit.

Explanation of Solution

Compute activity cost allocated for C’s visit.

Activity Cost Pools Activity-Based Overhead Rates × Actual Use of Activity-Base (Cost Driver) = Activity Cost Allocated
Guest check-in $8 per guest check-...

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Chapter 26 Solutions

Financial & Managerial Accounting
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