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This is an example of ABC for a service company. Costko Payroll Services provides weekly payroll processing for a number of small businesses. Patrick Costko, the company's owner, has been using activity-based costing system for several years. He used the following information in preparing this year's budget.

Activity Cost Pool Total Cost Cost Driver Expected Driver Volume

Setting up new employees $75,000 No. of employees 500

Processing weekly payroll $780,000 No. of paychecks printed 2,500,000

Weekly reporting $300,000 No. of clients 100

Annual tax reporting $240,000 No. of W-2s printed 60,000

Required:

(a) Calculate the four activity rates.

(b) Patrick is preparing a proposal for a prospective client, Turlock Dialysis Center. The client has 20 employees. What is the estimated cost of providing weekly payroll services to this client for the first year?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9955661

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