Brett Graham has been working on Hiltech\'s activity-based cost implementation t

Question

Brett Graham has been working on Hiltech's activity-based cost implementation team. One of his assignments is to study the information services department. One activity cost pool in the department is providing support for computer users by providing a help desk that users can call and ask questions. Brett has identified two possible cost drivers for this activity cost pool: number of calls and length of call in minutes. Identify some of the costs that will be included in this activity cost pool LINK TO TEXT LINK TO VIDEO Which of the proposed cost drivers would be best for this activity cost pool? Why? LINK TO TEXT LINK TO VIDEO

Explanation / Answer

Solution 1:

Cost that can be included in activity cost pool of helpdesk:

1. Salary of calling agents.

2. Calling expenses

3. Internet cost

4. lease rent of help desk premises

5. Repair and maintenance cost of equipment installed at helpdesk

6. Insurance expense of help desk premises

The above is just illustrative list of cost that could be included in activity cost pool.

Solution 2:

The best cost driver for activity cost pool is "Length of call in minutes". This cost driver is better than nos of calls because calls can be for long and short duration, therefore distribution of cost on the basis of number of calls attended may not be fair and even distribution. Therefore length of call in minutes is best cost driver that should be used.

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