Outdoor Amusement Fun Is an Amusement Park Located in Vancouver

Outdoor Amusement Fun is an amusement park located in Vancouver, British Columbia. It is organized into 6 departments: arcades and shows, food and beverage, rides, communications, human resources, and maintenance. Outdoor Amusement Fun is implementing an ABC system to allocate the costs of the service activities (communications, human resources, and maintenance)to product-line departments (arcades and shows, food and beverage, and rides). Thus, the product-line departments are the cost objects. The total costs and cost drivers for each service activity are:
Activity Total Cost Cost Driver
Communication $16,000 Number of department-specific memos prepared and distributed
Human resources 21,000 Number of employees
Maintenance 18,000 Square metres
Information regarding cost drivers and allocation bases is as follows:
Number of Department-
Number Square Specific Memos
of Employees Metres Prepared & Distributed
Arcades & shows 20 5,000 6
Food & beverage 50 7,000 4
Rides 30 6,000 6
Communications 10 1,000 4
Human resources 10 1,000 3
Maintenance 30 1,000 1
Direct costs and revenues for each product-line department are as follows:
Revenues Direct Costs
Arcades & shows $50,000 $8,000
Food & beverage 125,000 6,000
Rides 150,000 4,000
a)Calculate the allocation rate for each service activity.
b)Interpret the allocation rate for each service activity (i.e., explain what it means).
c)Calculate the total service activity costs allocated to each product-line department.
d)Calculate the operating profit (revenues - direct costs - allocated costs)for each product-line department.
[Note to Professors: The data in exercise #4 is the same as the data in multiple choice questions #27-31. However, the exercise questions differ from the multiple choice questions.]