Question 7 ABC COSTING

QUESTION 7: ABC costing [20 marks] LeadME, is training company that provides management development training courses across Australia. It offers two training packages: a two-day short course (covering leadership skills, managing change and people management) and a five-day course (covering strategic management, supply chain management and performance measurement). At the end of the financial year, LeadME's management accountant reviewed the company's total costs with a view to set the prices for the coming year. Over the past 12 months the company ran 30 two-day courses, with an average of 50 participants and 50 five-day courses with an average of 25 participants. The total costs amounted to $943 000. The following activities and costs for last year: Activity Activity Cost Activity Driver Quantity of Activity Driver Advertise Course 540 000 Number of courses 80 Hire Presenter 5600 000 Number of days 310 Hire premises 538 000 Number of days 310 Produce handouts 540 000 Number of participants 2 750 Provide lunch $225 000 Number of person days 13 000 Total Costs $943 000Required: 1. Estimate the cost of the two-day course using an 'average cost per day' approach. Provide your answer to the nearest whole number [5 marks]. 2. Estimate the cost of the two-day course, using activity based costing. Provide your final answer rounded to the nearest whole number [10 marks]. 3. Which cost out of those estimated in 1) and 2) above would provide a more reliable basis for cost-plus pricing? Explain your answer [5 marks]