In Exhibit 14 within Chapter 4, the text divides the operations of a hospital into five activities and assigns a cost to each of these activities. As a result, each customer is assigned only the costs of the hospital services (activities) he or she uses.

REQUIREMENT 1: Select a type service business. You may not use a hospital.

REQUIREMENT 2: List the activities that the business would perform in providing its services to customers. For example: A Bank is a service business. The activities involved in loan processing would be: meeting with clients, reviewing applications and running credit reports.

REQUIREMENT 3 ( OPTION 1): Write a professional email to the owner of that business explaining how activity-based costing could assist him or her with managing the business. In the bank example, a discussion about the cost drivers associated with the activities would be needed: Hours of meeting time, number of applications received, and number of credit reports run. After identifying the activities and cost drivers, an explanation would be given on how using an activity-based costing method would help the bank operate more effectively? How would management use the activities and cost drivers?