Appleby Community Centre (ACC) offers various courses for residents in the area. One of the biggest overhead costs is the administration cost, which includes registration, coordinating with the instructors and students, and room bookings. ACC runs the courses three terms a year, using 30 classrooms each term, and offers 1,750 course sections. ACC groups the courses into three departments€”Arts & Design, Languages, and Technology€”with a total enrolment of 3,600 students a year. The total administration costs were $126,000 last year. An accounting co-op student was hired to help AAC better understand how the resources were used to support delivering these courses and to determine whether the overhead costs could be reduced, especially the administration costs. The additional information for ACC€™s operation is as follows:

REQUIRED

A. Classify each of the activities as unit-level, batch level, product/service sustaining, or organization sustaining level.
Cost Driver.............................................. Cost Hierarchy Classification
Departments
Classrooms
Courses
Students

B. ACC would like determine the fee for the courses offered to see whether the fee would be able to cover the cost. The director of ACC believes that the number of students is the main cost driver for the administration cost. What is the rate that should be charge to each student? How much should each department be charged for the administration costs based on students as the cost driver?
C. After some investigation, the co-op student found that 60% of administration costs are related to the registration, 25% to coordination, and 15% to room booking. What is the overhead cost allocated for each of these activities? If the number of students is the cost driver for registration, courses for coordination, and number of rooms for room booking, what is the overhead rate for each activity? Using ABC costing, what amount should be allocated to each department?
D. Based on parts B and C, which costing method should the co-op student recommend? Some researchers say that the cost of using the ABC system may outweigh the benefit. Do you agree that the main cost driver is students, since all the activities are to support students in the learning program? Do you see any significant differences in allocating the overhead? Provide your arguments to justify your recommended costing approach.

Transcribed Image Text:

Courses Offered 350 525 875 Room Usage 10% 20% 70% Students 1,440 900 1,260 Department Arts & Design Languages Technology