Problem:
Choosing cost drivers, activity-based costing, activity-based management. Annie Warbucks runs a dance studio with childcare and adult fitness classes. Annie's budget for the upcoming year is as follows:
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Annie Warbuck's Dance Studio
Budgeted Costs and Activities
For the Year Ended June 30, 2010
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Dance teacher salaries
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$62,100
|
|
|
Child care teacher salaries
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24,300
|
|
|
Fitness instructor salaries
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39,060
|
|
|
Total salaries
|
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$125,460
|
|
Supplies (art, dance accessories, fitness)
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21,984
|
|
Rent, maintenance, and utilities
|
|
97,511
|
|
Administration salaries
|
|
50,075
|
|
Marketing expenses
|
|
21,000
|
|
Total
|
|
$316,030
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Other budget information follows:
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Dance
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Childcare
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Fitness
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Total
|
|
Square footage
|
6,000
|
3,150
|
2,500
|
11,650
|
|
Number of participants
|
1,485
|
450
|
270
|
2,205
|
|
Teachers per hour
|
3
|
3
|
1
|
7
|
|
Number of advertisements
|
26
|
24
|
20
|
70
|
1. Determine which costs are direct costs and which costs are indirect costs of different programs.
2. Choose a cost driver for the indirect costs and calculate the budgeted cost per unit of the cost driver. Explain briefly your choice of cost driver.
3. Calculate the budgeted costs of each program.
4. How can Annie use this information for pricing? What other factors should she consider?