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bUSINESS 294 ? Assignment #4
Question [26 marks]
Horses R Us (HRUS) Co. is a horse grooming and training company. They also supply horses
to movie productions to star in various movies. They have experienced horse handlers, horse
groomers and provide horses and all other services needed to care for and transport the
Over the weekend of January 6th and 7th, HRUS had 2 different jobs. The first job was to
provide their services to a horse SHOW in Coquitlam. The second job was to provide their
services plus some of their very highly trained horses to a MOVIE company in Vancouver.
Both the SHOW and the MOVIE were open from 10 am to 6 pm.
The following is a list of the total (incremental) costs incurred for the weekend:
Horse Food 948
Additional information follows:
The SHOW took place on January 7th (Sunday). The MOVIE took place on January 6th and 7th
(Saturday and Sunday).
HRUS provided the SHOW with handlers and groomers for 25 horses owned by the clients.
The clients delivered their horses to HRUS stables on the morning of January 7th. HRUS
supplied 8 horses to the MOVIE and serviced those horses. Every horse has a handler.
Inexperienced handlers were used for the SHOW. Inexperienced handlers are paid $20/hour.
Experienced handlers were sent to the MOVIE with the horses. They are paid $35/hour. Due
to the stunts the horses have to perform for the MOVIE, the handlers have to spend two extra
hours calming the horses down at the end of the day.
The SHOW is 25 miles away from HRUS stables and offices. The MOVIE is 10 miles away
from HRUS stables.
HRUS groomers were used for both events. They are paid $500 per day for grooming
services, and each groomer can care for 6 horses per day. However, the horses in the MOVIE
required more time to groom, so each groomer took twice as long on the MOVIE horses. (All
groomers work the same hours per day. Different groomers are used at each event.)
HRUS will supply horse treats only, for the clients horses used in the SHOW. Each horse
usually eats one bag of treats a day. HRUS horses used in the MOVIE are fed bales of hay
and treats. Each horse gets 4 bales of hay (per day) and will eat 20% less treats (per day)
than the horses at the SHOW. Each bag of treats that is opened during the day is thrown out if
it is not eaten (by any horse). Bales of hay cost $7.50 per bale. Treats are $12 per bag.
When there is an event, government regulations require a separate veterinarian to be on call
throughout each event (from 10 am to 6 pm). The vets charge by the hour.
Transportation costs include the use of their vans to transport the horses, food, handlers and
equipment to the events. In addition to carrying the food and equipment, the vans can carry a
maximum of 6 handlers and 6 horses each. When the event goes on for more than a day, the
handlers need to use a cab to get home and return to the event the next day as the vans are left
at the events location overnight. The cabs hold a maximum of 5 riders. The cab ride from the
stables to Vancouver is $30 per trip and the cab ride from the stables to Coquitlam is $15. The
cost of cabs is included in transportation costs. (The groomers do not use the cabs.)
HRUS Co. employs supervisors who work on the weekends (Saturday and Sunday). The
supervisors spent 2 hours at the MOVIE over the weekend and 3 times as long at the SHOW,
the supervisors remaining time on the weekend was spent at the stables. The supervisors
normally work from 10 am to 6 pm (and each supervisor gets paid the same amount).
a) Assuming that handler hours are used to allocate ALL costs, how should the weekends
total costs ($29,758) be allocated between the two events?
b) Provide two reasons why using handler hours to allocate all the costs is not the best
c) Using activity based costing (user fee approach), calculate how much of the $29,758
should be allocated to the SHOW and how much should be allocated to the MOVIE event?
Where applicable, directly trace specific costs to each event. Any facility
level/organization sustaining costs should be allocated using handler hours.
ONLY SUBMIT THE PAGES THAT START WITH NAME (pages 3?6)
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