Activity Based Costing Chapter 1

How to calculate totals cost on original basis: Cost driver rates: Accounts preparation and advice Requesting missing information Issuing fee payment reminders Holding client meetings $60,000/250 meetings = $240 per Travelling to clients $40,000/10,000 miles = $4 per mile Client costs: $580,000/18,000 hours = $32.222 per hour $30,000/250 times = $120 per request $15,000/400 times = $37.50 per reminder meeting Accounts preparation and advice $32,222 $8,055 $10,955 Requesting missing information $480 $1,200 $720 Issuing fee payment reminders $75 $300 $375 Holding client meetings $960 $240 $480 Travelling to clients $600 $2,400 $0 ––––––– ––––––– ––––––– Total costs $34,337 $12,195 $12,530 Total costs on original basis (*) $40,280 $10,070 $13,695 Client fees – new basis (W1) $41,204 $14,634 $15,036 Client fees – original basis $48,336 $12,084 $16,434 Increase/(Decrease) $(7,132) $2,550 $(1,398) (*) $725,000/18,000 hours = $40.28 per hour