Optimum Health Inc. 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 $120,000 to its consultants and incur indirect operating costs of $180,000. Actual consultant labor costs were $135,000 and actual indirect operating costs were $170,000. The cost records for three of Optimum's clients are summarized below: Food and nutritional supplements Nutritional counseling ($12 per hour) Personal fitness training ($17 per hour) Indirect operating costs Judy $. 500 120 340 2 Tom Elizabeth $300 $1,000 240 510 2 144 680 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 $320. Food and nutritional supplements are priced at 30 percent above cost. Clients are charged $37 per hour for consulting services (both nutrition counseling and personal training). Determine the profitability of each client.
Optimum Health Inc. 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 $120,000 to its consultants and incur indirect operating costs of $180,000. Actual consultant labor costs were $135,000 and actual indirect operating costs were $170,000. The cost records for three of Optimum's clients are summarized below: Food and nutritional supplements Nutritional counseling ($12 per hour) Personal fitness training ($17 per hour) Indirect operating costs Judy $. 500 120 340 2 Tom Elizabeth $300 $1,000 240 510 2 144 680 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 $320. Food and nutritional supplements are priced at 30 percent above cost. Clients are charged $37 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
Problem 1Q
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Transcribed Image Text:Optimum Health Inc. 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 $120,000 to its consultants and incur indirect operating costs of
$180,000. Actual consultant labor costs were $135,000 and actual indirect operating costs were $170,000. The cost records for three
of Optimum's clients are summarized below:
Food and nutritional supplements
Nutritional counseling ($12 per hour)
Personal fitness training ($17 per hour)
Indirect operating costs
Required:
1. Compute the predetermined overhead rate.
2. Determine the total cost of serving each client.
Judy
$ 500
120
340
2
Tom
$1,000
240
510
2
Elizabeth
$ 300
144
680
2
3. Assume the company charges clients an up-front fee of $320. Food and nutritional supplements are priced at 30 percent above
cost. Clients are charged $37 per hour for consulting services (both nutrition counseling and personal training). Determine the
profitability of each client.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Compute the predetermined overhead rate.
Predetermined Overhead Rate
Required 1 Required 2 Required 3
Total Cost of Serving
Complete this question by entering your answers in the tabs below.
Required 3
Determine the total cost of serving each client.
Required 1 Required 2
Profitability
%
Required 3
Judy
Complete this question by entering your answers in the tabs below.
Tom
Judy
< Required 1
Elizabeth
Tom
< Required 2
< Required 1
Assume the company charges clients an up-front fee of $320. Food and nutritional supplements are priced at 30 percent
above cost. Clients are charged $37 per hour for consulting services (both nutrition counseling and personal training).
Determine the profitability of each client.
Elizabeth
Required 2 >
Required 3 >
Required 3 >
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