Kolbec Community College (KCC) has 4,000 full-time students and offers a variety of academic programs in three areas: professional studies, arts, and technology. The professional studies programs prepare students for administrative and clerical jobs in a variety of professional settings, including accounting, medicine, and law. The arts program’s offerings are wide ranging and include graphic design, digital animation, culinary arts, cosmetology, and music arts. The technology programs are also varied, including information technology, medical laboratory technology, electrical engineering technology, pharmacy technology, and natural resources technology.

Required:

1. Using the traditional approach to assigning overhead costs to academic programs:

a. Calculate the predetermined overhead rate.

b. Assign the overhead costs to each academic program using the predetermined rate.

c. Calculate the total cost per student (direct costs plus overhead) of operating each academic program.

2. Using ABC, complete the following requirements:

a. Using Exhibit as a guide, complete the first-stage allocation of overhead costs to academic programs.

b. Using Exhibit as a guide, calculate the activity rates for each of the activity cost pools.

c. Using the activity rates calculated in ( b ), complete the second-stage allocation of over- head to academic programs.

3. Based on the results of (2), calculate the total cost per student (direct costs plus overhead) of operating each academic program.

4. Draft a memo to Jones explaining the key reasons for differences in the total cost per student of operating each academic program that arise between the traditional costing approach and ABC.