Reference no: EM13490067
Problem
AndrackiConsulting provides business consulting 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
Consulting .................................. $4,600,000 8,000 days
Research Support.............................. $285,000 1,900 hours
Account Support........................... $91,000 350 clients
Other...................................... $150,000 Not applicable
Total...................................... $5,126,000
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
One particular client, the LasonCompany, required 46 days of consulting and 92 hours of research during the year. For this consulting service, the client was charged $68,555.
Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools. Round off all calculations to the nearest whole cent.
b. Using the activity-based costing system, compute the customer margin for the Lason family. Round off all calculations to the nearest whole cent.
c. Assume the company decides instead to use a traditional costing system in which ALL costs are allocated to customers on the basis of consulting days. Compute the margin for the Lason Company family. Round off all calculations to the nearest whole cent.