Account Analysis

The accounting department of a large limousine company is analyzing the costs of its services. The cost data and level of activity for the past 16 months follow:

 

 

Customer

Paychecks

Accounting

Month

Special Analyses

Accounts

Processed

Service Costs

1

2

325

1,029

$ 63,800

2

4

310

993

68,900

3

2

302

1,268

64,000

4

1

213

1,028

61,300

5

2

222

984

61,600

6

0

214

712

50,800

7

1

131

762

51,020

8

1

123

739

54,300

9

0

115

708

50,500

10

2

296

1,232

64,800

11

2

213

978

58,000

12

1

222

929

57,500

13

2

217

1,059

62,200

14

2

132

942

54,900

15

4

300

1,299

71,530

16

4

315

1,283

64,800

Totals

30

3,650

15,945

$959,950

In addition to the above information, you learn that the accounting department had the following total costs for the past 16 months for each of the following:

Total cost of paychecks processed

$180,100

Total cost of maintaining customer accounts

109,600

Total cost of performing special analyses

120,000

Total fixed costs (total for 16 months)

550,250

Total costs

$959,950

Required

a. What is the cost per unit for (1) paychecks processed, (2) customer accounts maintained, and (3) special analyses performed?

b. Assuming the following level of cost driver volumes for a month, what are the accounting department’s estimated costs of doing business using the account analysis approach?

• 1,000 paychecks processed

• 200 customer accounts maintained

• 3 special analyses