E2-12 (Algo) Applying Job Order Costing in a Service Setting [LO 2-3,2-4, 2-7] Optimum Health Incorporated provides diet, fitness, and nutrition services to clients who want a healthier lifestyle. The company customizes a program for each client based on their individual goals that includes diet recommendations (prepackaged food and supplements), nutrition counseling, and guided fitness (personal training). The company uses a modified job order cost system that keeps track of the cost of the food, vitamins, and nutritional supplements the company provides to each client, as well as the amount of time nutrition and fitness consultants spend with each client. Optimum applies all indirect operating costs (eg, rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $140,000 to its consultants and incur indirect operating costs of $210,000. Actual consultant labor costs were $155,000 and actual indirect operating costs were $200,000. The cost records for three of Optimum's clients are summarized below: Food and nutritional supplements Nutritional counseling (514 per hour) Personal fitness training ($19 per hour) Indirect operating costs Judy $ 600 140 380 Tom $ 1,100 280 570 Elizabeth $ 400 168 760 Required: 1. Compute the predetermined overhead rate. 2. Determine the total cost of serving each client. 3. Assume the company charges clients an up-front fee of $340. Food and nutritional supplements are priced at 25 percent above cost. Clients are charged $40 per hour for consulting services (both nutrition counseling and personal training). Determine the profitability of each client.
E2-12 (Algo) Applying Job Order Costing in a Service Setting [LO 2-3,2-4, 2-7] Optimum Health Incorporated provides diet, fitness, and nutrition services to clients who want a healthier lifestyle. The company customizes a program for each client based on their individual goals that includes diet recommendations (prepackaged food and supplements), nutrition counseling, and guided fitness (personal training). The company uses a modified job order cost system that keeps track of the cost of the food, vitamins, and nutritional supplements the company provides to each client, as well as the amount of time nutrition and fitness consultants spend with each client. Optimum applies all indirect operating costs (eg, rent, utilities, and management salaries) as a percentage of the consultant's labor cost. During the most recent year, the firm estimated that it would pay $140,000 to its consultants and incur indirect operating costs of $210,000. Actual consultant labor costs were $155,000 and actual indirect operating costs were $200,000. The cost records for three of Optimum's clients are summarized below: Food and nutritional supplements Nutritional counseling (514 per hour) Personal fitness training ($19 per hour) Indirect operating costs Judy $ 600 140 380 Tom $ 1,100 280 570 Elizabeth $ 400 168 760 Required: 1. Compute the predetermined overhead rate. 2. Determine the total cost of serving each client. 3. Assume the company charges clients an up-front fee of $340. Food and nutritional supplements are priced at 25 percent above cost. Clients are charged $40 per hour for consulting services (both nutrition counseling and personal training). Determine the profitability of each client.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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E2-12 (Algo) Applying Job Order Costing in a Service Setting [LO 2-3, 2-4, 2-7]
Optimum Health Incorporated provides diet, fitness, and nutrition services to clients who want a healthier lifestyle. The company
customizes a program for each client based on their individual goals that includes diet recommendations (prepackaged food and
supplements), nutrition counseling, and guided fitness (personal training). The company uses a modified job order cost system that
keeps track of the cost of the food, vitamins, and nutritional supplements the company provides to each client, as well as the amount
of time nutrition and fitness consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and
management salaries) as a percentage of the consultant's labor cost.
During the most recent year, the firm estimated that it would pay $140,000 to its consultants and incur indirect operating costs of
$210,000. Actual consultant labor costs were $155,000 and actual indirect operating costs were $200,000. The cost records for three
of Optimum's clients are summarized below:
Food and nutritional supplements
Nutritional counseling (514 per hour)
Personal fitness training (519 per hour)
Indirect operating costs
Judy
$ 600
140
380
Tom
$ 1,100
7
280
570
Elizabeth
$ 400
168
760
7
Required:
1. Compute the predetermined overhead rate.
2. Determine the total cost of serving each client.
3. Assume the company charges clients an up-front fee of $340. Food and nutritional supplements are priced at 25 percent above:
cost. Clients are charged $40 per hour for consulting services (both nutrition counseling and personal training). Determine the
profitability of each client.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F905c94b6-664c-48ad-8fe9-215e75e9e3cc%2F7d78106c-bb87-427b-8f0b-e0a5a7173230%2Ft7qf9a_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3
s
E2-12 (Algo) Applying Job Order Costing in a Service Setting [LO 2-3, 2-4, 2-7]
Optimum Health Incorporated provides diet, fitness, and nutrition services to clients who want a healthier lifestyle. The company
customizes a program for each client based on their individual goals that includes diet recommendations (prepackaged food and
supplements), nutrition counseling, and guided fitness (personal training). The company uses a modified job order cost system that
keeps track of the cost of the food, vitamins, and nutritional supplements the company provides to each client, as well as the amount
of time nutrition and fitness consultants spend with each client. Optimum applies all indirect operating costs (e.g., rent, utilities, and
management salaries) as a percentage of the consultant's labor cost.
During the most recent year, the firm estimated that it would pay $140,000 to its consultants and incur indirect operating costs of
$210,000. Actual consultant labor costs were $155,000 and actual indirect operating costs were $200,000. The cost records for three
of Optimum's clients are summarized below:
Food and nutritional supplements
Nutritional counseling (514 per hour)
Personal fitness training (519 per hour)
Indirect operating costs
Judy
$ 600
140
380
Tom
$ 1,100
7
280
570
Elizabeth
$ 400
168
760
7
Required:
1. Compute the predetermined overhead rate.
2. Determine the total cost of serving each client.
3. Assume the company charges clients an up-front fee of $340. Food and nutritional supplements are priced at 25 percent above:
cost. Clients are charged $40 per hour for consulting services (both nutrition counseling and personal training). Determine the
profitability of each client.
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