Problem -
Tri-County Vets is a small-town veterinary that offers two primary services by its two partners (also the veterinarians); farm animal services and pet care services. Providing veterinary care to farm animals requires travel to the farm animal (house calls), while veterinary care to pets generally requires that the pet be brought into the clinic. As part of an investigation to determine the contribution that each of these two types of services makes to overall profit, one partner argues for allocating overhead using an activity-based costing system while the other partner argues for a more traditional and simple method that allocates overhead on the basis of direct labor hours. The partners agree to use next year's budgeted data, as prepared by their public accountant, for analysis and comparison purposes. See the following table below for the projected budget overhead data for next year.
Requirements:
1. Calculate the POHR using the traditional costing system.
2. Using traditional product costing as proposed by one partner, compute the total overhead cost assigned to:
(a) The Farm animals services
(b) The pet services
3. (a) Using activity-based costing, prepare a schedule showing the computations for the activity-based overhead rates (per cost driver).
(c) Prepare a schedule assigning each activity's overhead cost pool to each service (farm animals and pets) based on the use of the cost drivers.