Mehilowns a taxi business in Newcastle. He recently expanded his business by including limousines.
Mehil’s accountant has provided the following information on monthly revenues and costs:
· The taxi division has monthly revenues of $3,475,000
· The Limousine division generates revenues of $375,000.
· Expenses of $2,656,750 were allocated to divisions based on the number of kilometres travelled.
Mehil has heard about Activity Based Costing and wants to know what benefits it could provide, so he has obtained the following monthly information on expenses for NSW:

Taxis Limousines
Bookings

44,000

1,500

Kilometres

1,200,000

150,000

Driver hours

67,500

10,000

Mehil has identified that the main activity cost areas include salaries, vehicle costs and booking fees.

Salaries

$1,360,000

Booking fees

$22,750

Fuel

$1,193,000

Call centre booking fees

$45,500

Vehicle maintenance

$35,500

Complete the following activities:
1. Identify the appropriate cost pools and calculate the appropriate driver rates for the activities listed above.
You may wish to use the following table in your answer

Cost pool Driver Driver unit Driver rate

2. Using ABC costing, prepare a product line profitability report.
Show all workings in your answer and ensure you have reconciled data to ensure accuracy of calculations.
3. Discuss two key observations identified from your calculations?