Curtis & Company is an architectural firm specializing in home remodeling for private clients and new office buildings for corporate clients.
Curtis & Company charges customers at a billing rate equal to 135% of the clients total job cost. A client’s total job cost is a combination of 1) professional time spent on the client, and 2) operating costs allocated to the client’s job. Curtis currently allocates operating costs to jobs based on the number of professional hours spent on the job.
Curtis estimates its five professionals will work a total of 9,000 hours on client jobs during the year, and their salaries will total $900,000. All operating costs other than professional salaries (travel reimbursements, copy costs, secretarial salaries, office lease, etc.) can be grouped into three activities. Relevant information for these activities are estimated as follows:
| Activity | Total Activity Cost | Cost Driver | Total Usage by Corporate Clients | Total Usage by Private Clients |
| Transportation to clients | $9,400 | round trip mileage to clients | 2,500 miles | 13,800 miles |
| blueprint copying | 30,700 | number of copies | 240 copies | 1,000 copies |
| office support | 197,800 | secretarial time | 2,500 hours | 3,000 hours |
| total operating cost | $237,900 |
Amy Lee hired Curtis & Company to design her kitchen remodeling. A total of 22 professional hours were spent on this job. In addition, Amy’s remodeling job required one of the professionals to travel back and forth to her house for a total of 150 miles. The blueprints had to be copied four times because Amy changed the plans several times. In addition, 15 hours of secretarial time were used lining up the subcontractors for the job.
-REQUIRED [ROUND ALL ALLOCATION RATES TO THE NEAREST CENT AND ALLOCATIONS TO THE NEAREST DOLLAR.]
-Part A
What is the total cost of Amy Lee’s remodeling job under the current system?
-Part B
What would be the total cost of Amy Lee’s remodeling job under an activity-based costing system?
