Johnson Gardening Company provides lawn and garden 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 Mowing/trimming $150,750 12,250 hours Job support 25,725 1,800 jobs Client support 7,250 250 clients Other 100,000 Not applicable Total $283,725 The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Guzman family, requested 26 jobs during the year that required a total of 150 hours of gardening. For these services, the client was charged $5,000. Required: a. Compute the activity rates for the activity cost pools. Round off all calculations for the nearest whole cent. b. Using the activity-based costing system, compute the customer margin for the Guzman 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 mowing/trimming hours. Compute the margin for the Guzman family. Round off all calculations to 2 decimal points (for example $11.29) View keyboard shortcuts
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Johnson Gardening Company provides lawn and garden services to its clients. The company uses an activity-based costing system for its
Activity Cost Pool Total Cost Total Activity
Mowing/trimming $150,750 12,250 hours
Job support 25,725 1,800 jobs
Client support 7,250 250 clients
Other 100,000 Not applicable
Total $283,725
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
One particular client, the Guzman family, requested 26 jobs during the year that required a total of 150 hours of gardening. For these services, the client was charged $5,000.
Required:
a. Compute the activity rates for the activity cost pools. Round off all calculations for the nearest whole cent.
b. Using the activity-based costing system, compute the customer margin for the Guzman 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 mowing/trimming hours. Compute the margin for the Guzman family. Round off all calculations to 2 decimal points (for example $11.29)
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