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 $210,000 to its consultants and incur indirect operating costs of $315,000. Actual consultant labor costs were $225,000 and actual indirect operating costs were $305,000. The cost records for three of Optimum's clients are summarized below: Food and nutritional supplements Nutritional counseling ($16 per hour) Personal fitness training ($21 per hour) Indirect operating costs Judy $ 600 160 420 Tom $ 1,100 320 638 Elizabeth $ 400 192 840 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 $410. Food and nutritional supplements are priced at 25 percent above cost. Clients are charged $42 per hour for consulting services (both nutrition counseling and personal training). Determine the profitability of each client
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 $210,000 to its consultants and incur indirect operating costs of $315,000. Actual consultant labor costs were $225,000 and actual indirect operating costs were $305,000. The cost records for three of Optimum's clients are summarized below: Food and nutritional supplements Nutritional counseling ($16 per hour) Personal fitness training ($21 per hour) Indirect operating costs Judy $ 600 160 420 Tom $ 1,100 320 638 Elizabeth $ 400 192 840 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 $410. Food and nutritional supplements are priced at 25 percent above cost. Clients are charged $42 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
Related questions
Question
Please do not give solution in image format
Transcribed Image Text: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 $210,000 to its consultants and incur indirect operating costs of
$315,000. Actual consultant labor costs were $225,000 and actual indirect operating costs were $305,000. The cost records for three
of Optimum's clients are summarized below:
Food and nutritional supplements
Nutritional counseling ($15 per hour)
Personal fitness training ($21 per hour)
Indirect operating costs
Judy
$ 600
160
420
Tom
$ 1,100
320
630
Elizabeth
$ 400
192
840
?
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 $410. Food and nutritional supplements are priced at 25 percent above
cost. Clients are charged $42 per hour for consulting services (both nutrition counseling and personal training). Determine the
profitability of each client.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education