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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A startup airline company out of Denver established 5 routes to Los Angeles, Las Vegas, Phoenix, Chicago, and Dallas last year and incurred total of $4,200,000 in overhead costs. The company wants to use activity-based method to allocate the indirect cost among the routes. The cost driver is identified as available seat miles (ASM). The following table presents the revenue passenger miles (RPM) and average load factor for each route. The overhead cost allocated to Los Angeles using ASM is nearest to. Route Total RPM Average Load Factor Total ASM Chicago 450,000 75% 600,000 Dallas 574,000 82% 700,000 Los Angeles 630,000 70% 900,000 Las Vegas 595,000 85% 700,000 Phoenix 480,000 80 600,000 Total ASM 3,500,000 O $450,000 $840,000 O $720,000 O $1,080,000
Transcribed Image Text:A startup airline company out of Denver established 5 routes to Los Angeles, Las Vegas, Phoenix, Chicago, and Dallas last year and incurred total of $4,200,000 in overhead costs. The company wants to use activity-based method to allocate the indirect cost among the routes. The cost driver is identified as available seat miles (ASM). The following table presents the revenue passenger miles (RPM) and average load factor for each route. The overhead cost allocated to Los Angeles using ASM is nearest to. Route Total RPM Average Load Factor Total ASM Chicago 450,000 75% 600,000 Dallas 574,000 82% 700,000 Los Angeles 630,000 70% 900,000 Las Vegas 595,000 85% 700,000 Phoenix 480,000 80 600,000 Total ASM 3,500,000 O $450,000 $840,000 O $720,000 O $1,080,000
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