Question 7.50 - Mini Case Question Design ABC Cost System, Usefulness of ABM The town of Jefferson owns and operates an animal shelter that performs three services: Housing and finding homes for stray and unwanted animals, Providing Healthcare and neutering services for the animals, and training pets. One of the facility is dedicated to housing animals waiting to be adopted. A second facility houses veterinarian services. A third facility houses the director, his staff, and several dog trainers. The facility also has several large meeting rooms that are frequently used for classes given by the animal trainers. The trainer work with all of the animals to ensure that they are relatively easy to manage. They also provide dog obedience classes for adopting families. Estimated annual cost for the animal shelter and its services are as follows:

Director and staff salaries	$60,000
Animal shelter employees salaries	100,000
Veterinarian and technicians	150,000
Animal trainers	40,000
Food and Supplies	125,000
Building-related cost	200,000

On average, 75 animals per day are housed at the facility, or about 27,375(75 *365) animal day in total. The number of animal housed during the year totaled 4,500. In addition, the trainers offer about 125 classes during about 30 weeks throughout the year. On average, 10 families attend each class. Last year the veterinarian clinic experienced 5,000 animal visits. One of the directors staff member just graduated from accounting program and would like to set up an ABC system for the shelter so that the director can better understand the cost for each of the shelters services. He gathers the following information: Square footage for each facility: Animal Shelter 5,000 Square feet Director and Training 3,000 Square feet Veterinary clinic 2,000 Square feet Percentage of trainer timed used in classes 50% Supplies used for veterinarian services $75,000 A. Identify cost pool and assign cost to them, considering the three cost object of interest B. Determine a cost driver for each cost pool and explain your choice. C. Calculate the allocation rate for each cost pool and cost driver. Interpret the allocation rate for each cost pool (i.e., explain what it means) D. Suppose the director is concerned about an increase in the number of adopted dogs returned to the shelter because of behavior problems. When dogs are returned, the shelter incurs extra animal intake and adoption costs, in addition to extra cost for board, room, and more training for the dogs. In addition, the director is concerned that adopting families may not want another dog because of their unhappy experience. The director views this as a quality problem and want to improve quality in adoption services and reduce cost at the same time. 1. List the four types of quality activities presented in the chapter. What type of quality problem is the shelter experiencing? Explain you answer. 2. Will the current ABC system help manager determine cost for their quality activities? explain. 3. List one new cost pool and cost pool and cost driver that could be used to improve the directors ability to analyze quality.