Must show work Chris Skeptical is an undergraduate at GrooveU who believes that
ID: 2533795 • Letter: M
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Chris Skeptical is an undergraduate at GrooveU who believes that the best way to learn is to apply her education to the world around her. She has recently learned about Activity-Based Costing, and notices that different types of students consume different amounts of GrooveU's resources She categorizes all students as either being "Partiers" or (else) "Grinders." The average Partier and the average Grinder consume the following resources in an academic year: ctivity (per vear Average Partier Average Grinder 12 Classes taken Student Advising hours Faculty office hours Hospital visits Police interventions 20 50 0.5 0.5 After a long negotiation with GrooveU's CFO (who for a long time claimed not to have any disaggregated cost data), Chris was able to allocate the total overhead costs of undergraduate education to the following activities (the overhead data below is for all students) Budgeted Budgeted Driver Volume Budgeted Overhead Overhead rate Activity Cost Driver Costs Classroonm Student Advising Faculty office Hospitalization Police Number of classes Hours with student Hours with student No. of visits No. of interventions 56,000 402,000 9,000 1,000 112,000 $22,400,000 $1,680,000 $4,020,000 $45,000,000 $200,000Explanation / Answer
Solution:-
(1) No of Partiers & No of Grinders:-
Total No of student as per Hint = 10000
Let X be the total no of Partiers & Y be the total no of Grinders
(No of Partiers * activity level per student) + (No of Grinders * activity level per student ) = Budgeted
Driver volume
In case of Police Intervention:-
( X * 0.5 ) + (Y * 0) = 1000
X = 2000
Total students 10000
Y = 10000-2000 = 8000
In case of Hospitalisation:-
(X*0.5) + (Y*1) = 9000
Let X be the 2000 as per police intervention case
(2000 * 0.5) + (Y*1) = 9000
Y = 8000
(2) Annual O/H cost of all Partiers as per Traditional Method ( No of classes):-
Total Bdt O/H Cost = 22400000 + 1680000 + 4020000 + 45000000 + 200000 = 73300000
Total No of classes = 112000
Cost per class = 73300000/112000 = 654.46
No of Partiers = 2000
Classes by partiers = 2000*8 = 16000
Total cost= 16000*654.46 = 10471360
(3) Annual O/H cost of all Partiers as per ABC Method:-
Budgeted O/H Rate
(A)
Budgeted Volume for Partiers(2000)
(B)
Cost
(A*B)
Class room
No of classes
(22400000/112000) = 200
(2000*8) = 16000
3200000
Student advising
Hrs with student
(1680000/56000) = 208.57
(2000*20) = 40000
8342800
Faculty office
Hrs with student
(4020000/402000) = 10
(2000*1) = 2000
20000
Hospitalization
No of visits
(45000000/9000) = 5000
(2000*0.5) = 1000
5000000
Police
No of intervention
(200000/1000) = 200
(2000*0.5) = 1000
200000
Total Cost
16762800
Budgeted O/H Rate
(A)
Budgeted Volume for Partiers(2000)
(B)
Cost
(A*B)
Class room
No of classes
(22400000/112000) = 200
(2000*8) = 16000
3200000
Student advising
Hrs with student
(1680000/56000) = 208.57
(2000*20) = 40000
8342800
Faculty office
Hrs with student
(4020000/402000) = 10
(2000*1) = 2000
20000
Hospitalization
No of visits
(45000000/9000) = 5000
(2000*0.5) = 1000
5000000
Police
No of intervention
(200000/1000) = 200
(2000*0.5) = 1000
200000
Total Cost
16762800
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