Mehil owns a taxi business in Newcastle. He recently expanded his business to include limousines.

Mehil's accountant has provided the following information about monthly income and costs:

· The taxi division has monthly income of $3,475,000

· The Limousine division generates income of $375,000.

· Expenses were assigned to the divisions for $2,656,750 based on the number of kilometres travelled.

Mehil has heard about activity-based costing and wants to know what benefits it could provide, so he has obtained the following monthly cost information for NSW:

	Taxis	limousines
reservations	44.000	1,500
Kilometres	1,200,000	150.000
Driving hours	67,500	10,000

Mehil has identified that the main areas of activity costs include salaries, vehicle costs, and reservation fees.

Wages	$1,360,000
reservation costs	$22,750
Combustible	$1,193,000
Call center booking fees	$45,500
Vehicle maintenance	$35,500

Complete the following activities:

1. Identify the appropriate cost pools and calculate the appropriate driver fees for the activities listed above.

2. Using the ABC cost estimate, prepare a product line profitability report.

Answer rating: 100% (QA)

The appropriate cost pools and driver fees are Reservations Cost pool Reservation costs 22750 Driver ... View the full answer