Accountant Junk Removal (AJR) has been in business for years. Due to recent poor results, AJR...

  

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Accountant Junk Removal (AJR) has been in business for years. Due to recent poor results, AJR feel that that certain customers are more profitable than other customers are. AIR would like to know what type of customers they should be looking for to help to improve its profit. It was decided that AJR adopt an Activity Based Costing method to help it better understand the costs associated with its revenue. The following information was collected based on a study performed by AJR: Activity Measure Per lbs Number of jobs Per Customer Not Applicable Activity Cost Pool Junk Removal Job Setup Scheduling Other Junk Disposal Insurance Wages General Admin Junk Removal 70% 40% 40% 0% 40% 50% Depreciation On-site Supplies AJRs Budget is as follows: Junk Disposal Insurance Wages General Admin Depreciation On-site Supplies Total Costs 600,000 370,000 200,000 168,000 80,000 60,000 1,478,000 AJR charges $2.50 per lbs removed. Total Activity 500,000 200 25 Distribution Across Activity Pools Job Setup 0% 10% 10% 50% 10% 20% Scheduling 30% 40% 35% 30% 40% 20% Other 0% 10% 15% 20% 10% 10% Required: (a) Prepare a report to show allocation of costs to the Activity Cost Pools. (b) Compute the Active Rate for each Activity Cost Pool. (c) The details of 4 different customers are below. Calculate the costs of each customer using the Activity rates from part (b). Ibs Removed Number of Jobs Customer 1 10,000 5 Customer 2 100,000 40 Customer 3 75,000 10 Customer 4 15,000 25 (d) Calculate the profit and profit % for each customer. (e) Based on the information from part (d), comment on the type of customers that AJR should be looking for to increase its profit. (f) is an area of its business that AJR could focus on to improve its amo of profit (dollars not percentage)? Accountant Junk Removal (AJR) has been in business for years. Due to recent poor results, AJR feel that that certain customers are more profitable than other customers are. AIR would like to know what type of customers they should be looking for to help to improve its profit. It was decided that AJR adopt an Activity Based Costing method to help it better understand the costs associated with its revenue. The following information was collected based on a study performed by AJR: Activity Measure Per lbs Number of jobs Per Customer Not Applicable Activity Cost Pool Junk Removal Job Setup Scheduling Other Junk Disposal Insurance Wages General Admin Junk Removal 70% 40% 40% 0% 40% 50% Depreciation On-site Supplies AJRs Budget is as follows: Junk Disposal Insurance Wages General Admin Depreciation On-site Supplies Total Costs 600,000 370,000 200,000 168,000 80,000 60,000 1,478,000 AJR charges $2.50 per lbs removed. Total Activity 500,000 200 25 Distribution Across Activity Pools Job Setup 0% 10% 10% 50% 10% 20% Scheduling 30% 40% 35% 30% 40% 20% Other 0% 10% 15% 20% 10% 10% Required: (a) Prepare a report to show allocation of costs to the Activity Cost Pools. (b) Compute the Active Rate for each Activity Cost Pool. (c) The details of 4 different customers are below. Calculate the costs of each customer using the Activity rates from part (b). Ibs Removed Number of Jobs Customer 1 10,000 5 Customer 2 100,000 40 Customer 3 75,000 10 Customer 4 15,000 25 (d) Calculate the profit and profit % for each customer. (e) Based on the information from part (d), comment on the type of customers that AJR should be looking for to increase its profit. (f) is an area of its business that AJR could focus on to improve its amo of profit (dollars not percentage)?

Answer rating: 100% (QA)

Lets go through each step of your request a Allocation of Costs to Activity Cost Pools First lets allocate the costs to the activity cost pools based ... View the full answer