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 1 190 1,100 $ 58,800 2 1 260 1,010 61,600 3 2 270 1,170 59,200 4 2 250 920 59,100 5 3 160 1,280 60,600 6 2 170 1,180 61,900 7 1 340 830 59,000 8 4 220 1,220 61,400 9 3 150 1,210 61,300 10 1 230 1,270 60,100 11 2 220 1,130 60,200 12 2 300 930 61,200 13 3 190 1,010 59,700 14 3 290 1,120 60,700 15 4 300 910 60,500 16 2 180 980 60,200 Totals 36 3,720 17,270 $ 965,500 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 $ 195,151 Total cost of maintaining customer accounts 114,948 Total cost of performing special analyses 143,640 Total fixed costs (total for 16 months) 511,761 Total costs $ 965,500 Required: a-1. What is the cost per unit for paychecks processed? a-2. What is the cost per unit for customer accounts maintained? a-3. What is the cost per unit for special analyses performed? 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? • 1,080 paychecks processed. • 160 customer accounts maintained. • 5 special analyses.

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	1			190	1,100	$	58,800
2	1			260	1,010		61,600
3	2			270	1,170		59,200
4	2			250	920		59,100
5	3			160	1,280		60,600
6	2			170	1,180		61,900
7	1			340	830		59,000
8	4			220	1,220		61,400
9	3			150	1,210		61,300
10	1			230	1,270		60,100
11	2			220	1,130		60,200
12	2			300	930		61,200
13	3			190	1,010		59,700
14	3			290	1,120		60,700
15	4			300	910		60,500
16	2			180	980		60,200
Totals	36			3,720	17,270	$	965,500

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	$	195,151
Total cost of maintaining customer accounts		114,948
Total cost of performing special analyses		143,640
Total fixed costs (total for 16 months)		511,761
Total costs	$	965,500

Required:

a-1. What is the cost per unit for paychecks processed?

a-2. What is the cost per unit for customer accounts maintained?

a-3. What is the cost per unit for special analyses performed?

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?

• 1,080 paychecks processed.

• 160 customer accounts maintained.

• 5 special analyses.

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