(a)
Concept introduction:
ABC costing is a methodology to allocate overhead. In the ABC costing, the allocation of overheads is through cost activity rather than through labor or machine hrs.
To compute:
Selection of cost drivers and activity rate.
Answer to Problem 15E
Nature of expense | Cost drivers | Activity rate for each quantity of cost drivers |
Building expenses | Area of square feet | |
Placement services | Number of students | |
Instructional courses | Number of Courses |
Explanation of Solution
In the give case, we have three cost drivers:
Nature of expense | Cost drivers | Total cost | Total quantity of cost drivers | Activity rate for each quantity of cost drivers |
Building expenses | Area of square feet | |||
Placement services | Number of students | |||
Instructional courses | Number of Courses |
(b)
Concept introduction:
In the ABC costing, there is distribution of all overhead cost in the ratio of respective cost drivers.
To compute:
Cost driver value and proportion for each group of students for each activity.
Answer to Problem 15E
Nature of expense | Education and Training | Continuing Professional Education |
Building expenses | ||
Placement services | ||
Instructional courses |
Explanation of Solution
Nature of expense | Total quantity of cost drivers | Education and Training | Continuing Professional Education | ||
Number of drivers | Proportion | Number of Drivers | Proportion | ||
Building expenses | |||||
Placement services | |||||
Instructional courses |
The proportion of education and training and continuing professional education with respect to each cost driver is calculated by dividing the number of drivers by the total cost drivers.
(c)
Concept introduction:
In order to correctly associate costs with product and services, ABC assigns cost to activities based on their resources.
Cost per unit for each student.
Answer to Problem 15E
Cost per unit for Education and Training Students is
Cost per unit for Continuing Professional Education Students is
Explanation of Solution
Nature of expense | Activity rate for each quantity of cost drivers | Education and Training | Continuing Professional Education | ||
Number of drivers | Amount | Number of Drivers | Amount | ||
Building expenses | |||||
Placement services | |||||
Instructional courses | |||||
Total |
The total amount of education and training and continuing professional education with respecti to each cost driver is calculated by multiplying of activity rate to number of drivers.
Total Cost of Education and Training Students is
Number of students in Education and Training program is
Total Cost of Continuing Professional Education is
Number of students in Continuing Professional Education is
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Chapter 4 Solutions
Managerial Accounting - With Access
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