Wanda has been so successful at producing and selling high quality dog chew toys that she is branching out and opening a Doggie Day Spa. She wants to be sure that she is charging her customers the correct price and has decided to use ABC costing to make her decision. She has provided the following information and asks that you determine the Activity Rates for each service she provides.
| Salaries | ||
| Doggie Spa Technicians | $ | 153,000 |
| Assistant Spa Manager Salary | 69,000 | |
| Spa Manager Salary | 95,000 | |
| Total | $ | 317,000 |
Virtually all of the other costs of the spa—rent, depreciation, utilities, and so on—are organization-sustaining costs that cannot be meaningfully assigned to individual customer transactions. In addition to the cost data above, the employees of the spa have been interviewed concerning how their time was distributed last year across the activities included in the activity based costing study. The results of those interviews appear below:
|
|
Distribution of Employee Time Across Activities |
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|
|
Booking Appointments |
Puppy Pedicures |
Tummy Rubbing |
Other |
Totals |
|
Spa Technicians |
0% |
73% |
14% |
13% |
100% |
|
Assistant Spa manager salary |
8% |
8% |
20% |
64% |
100% |
|
Spa Manager salary |
0% |
0% |
18% |
82% |
100% |
Wanda has provided the following data concerning the transactions during her first year of business:
| Activity | Total Activity at the Spa |
| Booking Appointments | 230 appointments booked |
| Puppy Pedicures | 42,500 Puppy Pedicures (they do have 4 feet after all!) |
| Tummy Rubbing | 900 Tummy Rubs |
Determine the Activity Rates for each service she provides.
| Activity | Activity Rate |
| Booking Appointments | $ |
| Puppy Pedicures | $ |
| Tummy Rubbing | $ |