Wild Leopard is a hotel that provides eco-tourism experience to foreign tourists in Sri Lanka. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Wild Leopard is a hotel that provides eco-tourism experience to foreign tourists in Sri Lanka. The hotel provides two types of luxury tented chalets; Standard and Deluxe. The monthly operating overhead cost of the company is Rs. 1.8 million. The company identifies 60% of these costs with the operation cost center and the balance with the maintenance cost center. Costs of the operation center are absorbed based on the expected occupancy level of room nights. Maintenance costs are absorbed as 31% of the direct costs of each chalet. Under normal circumstances, the company estimates an occupancy level of 80 room nights for a standard chalet and 50 room nights for a deluxe chalet per month. The management wishes to change the current absorption costing system to the Activity Based Costing system for computing the cost per room night. The following information is available. The company has allocated the operating overhead cost to the activities as given below. Cost (Rs.) 50,000 Activity Luggage delivery Reception and billing 350,000 Restaurant operation 800,000 Swimming pool maintenance 460,000 Handling pickup and drop off 140,000 Cost driver Number of deliveries No of bills 120 80 No of Kitchen Order Tickets 75 No of guests 160 No of pickups/drop-offs 120 No of Kitchen Order Tickets No of guests No of pickups/drop-offs Estimated volumes of cost drivers for two types of chalets are given below. Cost driver Standard Deluxe Number of deliveries No of bills 70 50 45 110 75 Direct cost per room, per night for a standard chalet is Rs.12,500 while a deluxe chalet is Rs.17,000. Required: a) Compute the total operating cost (i.e direct cost plus operating overhead cost) per room night of each chalet under Absorption Costing and Activity Based Costing. (07 marks) b) Discuss the benefits of applying Time Driven ABC method instead of traditional ABC method by Wild Leopard Company. (03marks) (Total 10marks) Wild Leopard is a hotel that provides eco-tourism experience to foreign tourists in Sri Lanka. The hotel provides two types of luxury tented chalets; Standard and Deluxe. The monthly operating overhead cost of the company is Rs. 1.8 million. The company identifies 60% of these costs with the operation cost center and the balance with the maintenance cost center. Costs of the operation center are absorbed based on the expected occupancy level of room nights. Maintenance costs are absorbed as 31% of the direct costs of each chalet. Under normal circumstances, the company estimates an occupancy level of 80 room nights for a standard chalet and 50 room nights for a deluxe chalet per month. The management wishes to change the current absorption costing system to the Activity Based Costing system for computing the cost per room night. The following information is available. The company has allocated the operating overhead cost to the activities as given below. Cost (Rs.) 50,000 Activity Luggage delivery Reception and billing 350,000 Restaurant operation 800,000 Swimming pool maintenance 460,000 Handling pickup and drop off 140,000 Cost driver Number of deliveries No of bills 120 80 No of Kitchen Order Tickets 75 No of guests 160 No of pickups/drop-offs 120 No of Kitchen Order Tickets No of guests No of pickups/drop-offs Estimated volumes of cost drivers for two types of chalets are given below. Cost driver Standard Deluxe Number of deliveries No of bills 70 50 45 110 75 Direct cost per room, per night for a standard chalet is Rs.12,500 while a deluxe chalet is Rs.17,000. Required: a) Compute the total operating cost (i.e direct cost plus operating overhead cost) per room night of each chalet under Absorption Costing and Activity Based Costing. (07 marks) b) Discuss the benefits of applying Time Driven ABC method instead of traditional ABC method by Wild Leopard Company. (03marks) (Total 10marks)
Expert Answer:
Related Book For
Quantitative Methods for Business
ISBN: 978-0324651751
11th Edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Round Tree Manor is a hotel that provides two types of rooms with three rental classes: Super Saver, Deluxe, and Business. The profit per night for each type of room and rental class is as follows:...
-
A UK company has a trading loss of 50,000 for the year to 31 March 2021. During the year, the company receives overseas property income (net of 40% withholding tax) of 12,000. Show the corporation...
-
a. Briefly explain the concept of the efficient market hypothesis (EMH) and each of its three formsweak, semi strong, and strongand briefly discuss the degree to which existing empirical evidence...
-
Derive the equations for slope and deflection for the beam in Figure P7.3. Compute the maximum deflection. Hint: Maximum deflection occurs at point of zero slope. M A L B
-
What is the difference between efficiency and effectiveness? Explain why both are valuable to managers.
-
In October 2010, Tibbetts Company had the following production and cost data: Beginning inventory units (80% complete as to DM; 45% complete as to DL; 30% complete as to OH) ....... 42,600 October...
-
Matching Question Match the IFRS debt instrument category with the corresponding US GAAP category with similar accounting treatment. Amortized Cost Amortized Cost drop zone empty. Fair value through...
-
The income statement and additional data of Noel Travel Products, Inc., follow: Additional data: a. Acquisition of plant assets was $150,000. Of this amount, $100,000 was paid in cash and $50,000 by...
-
Cadbury Schweppes owns and operates a chain of 12 vegetable protein "hamburger" outlets in northern Louisiana. Sales figures and advertising expenses for the stores are provided in the table below....
-
You would like to have $35,000 to spend on a new car in five years. You open a savings account with an APR of 4%. How much must you deposit each quarter to reach this goal?
-
Clorox reports interest expense of $85 on their income statement for fiscal year 2018, but there is no specific interest line item on the 2018 statement of cash flows. What is the most reasonable...
-
An investor wants to form a two asset portfolio with proportion y of available funds invested in a risky portfolio with an expected return of 11% and a standard deviation of 15% and the remaining...
-
Rory is an accountant who frequently uses spreadsheets to create expense reports and budgets. She is training a new administrative assistant to help her enter data into spreadsheets, but as she is...
-
Suppose you are an investor and is considering depositing $20,000 initially and making monthly contributions of $250 per month, the first contribution will be one month from today into investment. If...
-
What volume of 0.0400 mol/dm calcium hydroxide just neutralises 25.0 cm of 0.100 mol/dm nitric acid? Give your answer to 3 significant figures Ca(OH)2(aq) + 2 HNO3(aq) Ca(NO3)2(aq) + 2 HO(1)
-
The diameter of a sphere is 18 in. Find the largest volume of regular pyramid of altitude 15 in. that can be cut from the sphere if the pyramid is (a) square, (b) pentagonal, (c) hexagonal, and (d)...
-
The Delta Group is a management consulting firm specializing in the health care industry. A team is being formed to study possible new markets, and a linear programming model has been developed for...
-
Most computer languages have a function that can be used to generate random numbers. In Microsofts Excel, the RAND function can be used to generate random numbers between 0 and 1. If we let x denote...
-
A new product has the following profit projections and associated probabilities: Profit Probability $150,000 ....... 0.10 $100,000 ........ 0.25 $ 50,000 ....... 0.20 0 ....... 0.15 -$ 50,000 ..........
-
Briefly explain the advantages and disadvantages of the ARR and the payback period.
-
From the following table, calculate the variances and discuss each one in relation to the following questions: i Is the variance positive or negative in terms of business performance? ii What are the...
-
The Anderson Group has identified the following capital expenditure proposals as acceptable. Only $150 000 is available for investment. Required: Determine the combination of proposals to be...
Study smarter with the SolutionInn App