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Exploding Diapers,Inc is a daycare company in NYC.The company has expanded and now has 3centers.Center 1's Income Statement showed the following: Revenue $240,000 Direct Expenses

Exploding Diapers,Inc is a daycare company in NYC.The company has expanded and now has 3centers.Center 1's Income Statement showed the following:

Revenue $240,000

Direct Expenses 195,200

OH 50,000

Operating Income (Loss) $(5,200)

The company's overhead for the year included the salary of the owner,Jihyo($90,000), and advertising ($60,000), and was allocated using a peanut-butter spread across all 3centers so that each was allocated $50,000.

Jihyospends her time overseeing the operations of all three centers and handling all paperwork (e.g., billing), and wants to reallocate the existing overhead costs to centers using recently collected information with respect to key activities and activity cost drivers. The estimated activity-based cost and driver data, which in the future will be collected automatically via a new software package using a commercially available product tailored to daycare providers, is presented below:

Overhead Activity Cost Pools

Total Activity Costs

Allocation base

Account Maintenance (e.g., billing)

$36,000

Number of preschool children

Meeting with parents

18,000

Number of parent meetings

Facilities maintenance (calling repairmen, etc.)

22,500

Maintenance costs

Overseeing operations

13,500

Spread evenly across centers

Gretchen's total salary

$90,000

Advertising

60,000

Number of advertising promotions

Activity Consumption by Center

Center 1

Center 2

Center 3

Estimated

Activity Total

Estimated

Practical Capacity

Number of preschool children

48

60

90

198

225

Number of parent meetings

48

60

350

458

480

Maintenance costs

5,000

4,000

2,000

11,000

11,250

Number of advertising promotions

6

6

20

32

32

Compute the revised operating income for Center 1 using "best practices" under the activity-based-costing method proposed by Jihyo. (ROUND to 2 decimal places in all calculations and enter your answer rounded to the nearest dollar. For example, if you believe the answer is "$25,347.69", enter "$25,348".)


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