Question

Bubba and Danny are college friends planning a skiing trip to Killington before the new year. They estimated the following for the trip:

Estimated Activity Allocation

Costs Allocation Base Bubba Danny

Food \( 400 Pounds of food eaten 24 26

Skiing 300 Number of lift tickets 2 0

Lodging 280 Number of nights 2 2

\) 980

Requirements

2. Danny does not like the idea of sharing the costs equally because he plans to stay in the room rather than ski. Danny suggests that each type of cost be allocated to each person based on the above-listed allocation bases. Using the activity allocation for each person, calculate the amount that each person would pay based on his own consumption of the activity.

Short answer

Overhead cost to Bubba: $632

Overhead cost to Danny: $348

Step-by-step solution

Calculation of predetermined overhead rates

$$\begin{gathered} \mathbf{}\mathbf{for}\mathbf{}\mathbf{food}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\frac{\mathbf{total}\mathbf{}\mathbf{food}\mathbf{}\mathbf{cost}}{\mathbf{total}\mathbf{}\mathbf{of}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{base}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{400}}{\mathbf{24}\mathbf{+}\mathbf{26}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{8} \end{gathered}$$

role="math" localid="1651057942337" $$\begin{gathered} \mathbf{}\mathbf{for}\mathbf{}\mathbf{skiing}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\frac{\mathbf{total}\mathbf{}\mathbf{skiing}\mathbf{}\mathbf{cost}}{\mathbf{total}\mathbf{}\mathbf{of}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{base}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{300}}{\mathbf{2}\mathbf{+}\mathbf{0}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{150} \end{gathered}$$

$$\begin{gathered} \mathbf{}\mathbf{for}\mathbf{}\mathbf{lodging}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{=}\frac{\mathbf{total}\mathbf{}\mathbf{lodging}\mathbf{}\mathbf{cost}}{\mathbf{total}\mathbf{}\mathbf{of}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{base}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{280}}{\mathbf{2}\mathbf{+}\mathbf{2}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{70} \end{gathered}$$

Overhead allocation for Bubba

$$\begin{gathered} \mathbf{food}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Bubba}\mathbf{}\mathbf{=}\mathbf{}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{activity}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Bubba} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{8}\mathbf{}\mathbf{\times }\mathbf{}\mathbf{24} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{192} \end{gathered}$$

$$\begin{gathered} \mathbf{skiing}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Bubba}\mathbf{}\mathbf{=}\mathbf{}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{activity}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Bubba} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{150}\mathbf{}\mathbf{\times }\mathbf{}\mathbf{2} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{300} \end{gathered}$$

$$\begin{gathered} \mathbf{lodging}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Bubba}\mathbf{}\mathbf{=}\mathbf{}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{activity}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Bubba} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{70}\mathbf{}\mathbf{\times }\mathbf{}\mathbf{2} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{140} \end{gathered}$$

$$\begin{gathered} \mathit{t}\mathit{o}\mathit{t}\mathit{a}\mathit{l}\mathbf{}\mathit{o}\mathit{v}\mathit{e}\mathit{r}\mathit{h}\mathit{e}\mathit{a}\mathit{d}\mathbf{}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Bubba}\mathbf{}\mathbf{=}\mathbf{food}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{+}\mathit{s}\mathit{k}\mathit{i}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{+}\mathbf{}\mathit{l}\mathit{o}\mathit{d}\mathit{g}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{a}\mathit{l}\mathit{l}\mathit{o}\mathit{c}\mathit{a}\mathit{t}\mathit{i}\mathit{o}\mathit{n} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{198}\mathbf{}\mathbf{\times }\mathbf{}\mathbf{\$}\mathbf{300}\mathbf{+}\mathbf{\$}\mathbf{140} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{632} \end{gathered}$$

Overhead allocation for Danny

$$\begin{gathered} \mathbf{food}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Danny}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{activity}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Danny} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{8}\mathbf{\times }\mathbf{26} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{208} \end{gathered}$$

$$\begin{gathered} \mathbf{skiing}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Danny}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{activity}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Danny} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{150}\mathbf{\times }\mathbf{0} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{0} \end{gathered}$$

$$\begin{gathered} \mathbf{lodging}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Danny}\mathbf{}\mathbf{=}\mathbf{predetermined}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{rate}\mathbf{}\mathbf{\times }\mathbf{activity}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{for}\mathbf{}\mathbf{Danny} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{70}\mathbf{\times }\mathbf{2} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{140} \end{gathered}$$

$$\begin{gathered} \mathbf{total}\mathbf{}\mathbf{overhead}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{to}\mathbf{}\mathbf{Danny}\mathbf{}\mathbf{=}\mathbf{food}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{+}\mathbf{}\mathbf{skiing}\mathbf{}\mathbf{allocation}\mathbf{}\mathbf{+}\mathbf{lodging}\mathbf{}\mathbf{}\mathbf{allocation} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{208}\mathbf{+}\mathbf{0}\mathbf{+}\mathbf{\$}\mathbf{140} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{348} \end{gathered}$$