Final answer:
The student's question involves activity-based costing in business, with focus on allocation of overhead costs, differentiating between fixed and variable costs, and applying this knowledge to real-world examples of service-based companies.
Step-by-step explanation:
The subject of the student's question involves activity-based costing, which is a method used in accounting to allocate overhead costs based on activities that drive costs, rather than traditional methods that allocate costs solely based on production volume. The given example of Drake Housecleaning introduces two activities: Client Setup and Cleaning, along with their respective total costs and the number of activities. The goal is likely to determine the cost per activity (cost driver rate) and then apply these rates to allocate the overhead costs to products or services based on the activities consumed.
Another example provided is a specialty cleaning company that uses a linear equation to express its fees, which consists of a fixed equipment fee and a variable labor fee based on the number of hours worked. This is similar to the concept of fixed and variable costs as exemplified by The Clip Joint barber shop example, where the fixed cost is the daily operating expenses and the variable cost changes with the number of barbers hired.
In summary, by understanding the nature of fixed and variable costs, and employing activity-based costing, businesses like Drake Housecleaning and the specialty cleaning company can more accurately assign costs to their services, leading to better pricing strategies and financial management.