1. Theta Construction

Scenario: Activity-Based Costing (ABC)

Data: Theta Construction uses activity-based costing to allocate overhead costs. The company identified the following cost pools and cost drivers:

• Cost Pool 1: $300,000, Cost Driver: Number of Inspections, Driver Quantity: 1,500
• Cost Pool 2: $200,000, Cost Driver: Square Feet of Construction, Driver Quantity: 100,000

Requirements:

1. Allocate overhead costs to Theta Construction's projects using activity-based costing.
2. Calculate the overhead cost per unit for each cost pool.
3. Analyze the cost allocation results and discuss how ABC improves cost accuracy in construction projects.
4. Recommend cost-saving strategies based on the ABC analysis.
5. Discuss the challenges of implementing ABC in the construction industry.
6. Evaluate the impact of allocating overhead costs on Theta Construction's profitability.