The library at Pacific Business School (PBS) serves both undergraduate and graduate programs. The dean of PBS is interested in evaluating the profitability of the degree programs and has asked the head of the library, Rex Gilmore, to allocate the annual library cost of $4,035,000 to the two programs. Rex believes that two cost drivers explain most of the costs: number of students and credit hours. Using information from a previous analysis, he split the annual library budget as follows:

Required
a. Allocate the cost of the library to the two programs (undergraduate and graduate).
b. Draw a cost flow diagram to illustrate your answer to requirement(a).

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1 Costs driven by number of students 2 Library management 3 Acquisitions 4 5 6 Costs driven by number of credit hours 7 Computer support 8 Building maintenance 9 Library staff 10 Utilities and supplies S 950,000 2.250,000 135,000 496,000 788,000 12 Total library costs 13 14 15 Data on students and credit hours 16 Number of students 17 Number of credit hours 18 Undergradate Graduate 900 600 16,500 13,500