Costing System and Optimal Order Quantity

Questions and answers

Question 2
a.
i. Existing costing system by Senior
Total cost of two projects = Cost of garden A + Cost of garden B
= $201,100 + $326,900
= $ 528,000
Working Note:
Senior categorizes its labor cost into professional and back-office support:
Professional staff cost per hour = $2,000,000 / 3,200 hours = $625 per hour
Back-office staff cost per hour = $800,000 / 5,000 hours = $160 per hour
Total cost of Garden A = (Professional staff cost per hour * professional labor hours for Garden
A) + (Back-office staff cost per hour * Back-office labor hours for Garden A)
= ($625 * 300) + ($160 * 85) = $201,100
Total cost of Garden B = (Professional staff cost per hour * professional labor hours for Garden
B) + (Back-office staff cost per hour * Back-office labor hours for Garden B)
= ($625 * 500) + ($160 * 90) = $326,900
ii. Activity based costing
Total cost of two projects = Cost of planning + Site scope cost + Construction administration
cost
= $8,000 + $78,000 + $60,500
= $146,500
Working note:
Planning cost per meetings = $200,000 / 400 = $500 per meetings