Q35390605
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ACCOUNTING
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Accounting
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Nov 24, 2024
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docx
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Q35390605
AID: 1825 | 22/03/2019
[Delimiter]
[General guidance]
[Section: Concepts and reason]
Operation costing: Operation costing is the type of costing involving both identical and
different products. Thus, it is a combination of both job and process costing. It is mostly
used in manufacturing companies.
Cost: Cost is any value spent to produce a product or to render any service. The types of
costs are fixed cost and variable cost.
[Section: Fundamentals]
Fixed cost: Fixed cost is a cost that remains the same, irrespective of the increase or
decrease in the value of goods or any services rendered. It is the cost paid by a company
that does not depend on the activities concerned with the business.
Variable cost: Variable cost is a cost that varies according to the output produced or any
service rendered. It is the cost paid by a company that depends on the activities concerned
with the business.
Stand-alone cost method: It is a process of allocating group cost to individuals.
[Delimiter]
[Starting Hint]
Based on the information given in the question, calculate the total round trip cost.
[Delimiter]
[Step 1]
Calculate the total round trip cost:
Round trip cost of ATL
Total cost =
+Round trip cost of HOU
$250
$450
$700
Therefore, the total round trip cost is $700.
[Explanation]
It is mentioned to calculate the consultant charge of the ATL and the HOU clients. Thus,
it is calculated on the basis of total cost of round trip. The total cost of the round trip is
calculated by adding the round trip cost of ATL and the HOU. Therefore, the total round
trip cost is $700.
[Hint for next step]
Based on the information given in the question, calculate the consultant charge of the
ATL and the HOU clients.
[Delimiter]
[Step 2]
Calculate the consultant charge of the ATL clients:
Combined cost
ATL cost
Consultant charge =
Total cost of round trip
$600
$250
$700
$150,000
$700
$214.29
Therefore, the consultant charge of the ATL clients is $214.29.
Calculate the consultant charge of the HOU clients:
Combined cost
HOU cost
Consultant charge =
Total cost of round trip
$600
$450
$700
$270,000
$700
$385.71
Therefore, the consultant charge of the HOU clients is $385.71.
[Answer]
The architect should charge the ATL client $214.29 and the HOU client $385.71.
[Answer End]
[Answer Choice: Wrong]
The architect should charge the ATL client $333.33 and the HOU client $933.33.
[Answer Choice End]
[Answer Choice: Wrong]
The architect should charge the ATL client $385.71 and the HOU client $214.26.
[Answer Choice End]
[Answer Choice: Correct]
The architect should charge the ATL client $214.29 and the HOU client $385.71.
[Answer Choice End]
[Answer Choice: Wrong]
The architect should charge the ATL client $933.33 and the HOU client $333.33.
[Answer Choice End]
[Explanation]
It is mentioned to calculate the consultant charge of the ATL and the HOU clients. Thus,
it is calculated by multiplying the trip cost with the combined trip cost divided by the
total cost of the round trip. Therefore, the architect should charge the ATL client $214.29
and the HOU client $385.71.
[Common mistakes]
Do not multiply the combined cost with the cost of the trip to calculate the charge that
should be collected.
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Related Questions
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Q3
Which of the following is a limitation of activity-based costing?
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Product costing provides useful decision-making information in relation to all of the
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Direct labour cost
Variable fixed overhead cost
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£20
£30
£50
£140
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a.
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b.
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c.
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d.
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