Data Processors provides credit card services for the banking industry. It is preparing its budget for 2020 and, as it has been using activity-based costing, it intends to develop an activity-based budget for 2020. The table below provides the actual cost driver rate for 2019, and the expected activity levels for 2020.

Required

(a) What is the budget for the activities for 2020?

(b) Previously, Data Processors used a traditional line-item budget. What benefits will the organisation gain by converting to the activity-based budget?

(c) How will the activity-based budget assist in reducing costs in the future?

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2020 Expected activity 2019 Actual Activity (cost driver) cost driver rate Non-business customers Business customers $0.40 5000 000 Transaction processing (number of transactions) 20000 000 Statements (number of statements) 4.00 200 000 750 000 New credit cards (number of credit cards) 5.00 100 000 500 000 Billing disputes (number of disputes) 30.00 50 000 100 000