Heights Academy, a private school, serves 500 students: 200 in the middle school (Grades 6 to 8)

Question:

Heights Academy, a private school, serves 500 students: 200 in the middle school (Grades 6 to 8) and 300 in the high school (Grades 9 to 12). Each school group has its own assistant principal, and there is one principal, Brian Smith, for the academy. For any single student, almost all of Heights' costs are indirect. Heights currently have five indirect cost categories, which are listed in the following table. Smith wants to develop an activity-based costing (ABC) system for the school. He identifies four activities-academic instruction, administration, sports training, and community relationships-related to the educational enterprise.

Smith and his team identify the number of students as the cost driver of academic instruction and administration costs, and the number of team sports offered by the school as the driver of sports training costs. The cost of maintaining community relationships-dealing with the town council and participating in local activities-is a facility-sustaining cost that the school has to incur each year. The table shows the percentage of costs in each line item used by each activity.

Heights Academy, a private school, serves 500 students: 200 in

Required
1. What is the overall cost of educating each student? Of this cost, what percentage is the cost of academic instruction? Of administration?
2. Smith is dismayed at the high cost of sports training. Further examination reveals that $300,000 of those costs are for ice hockey, a sport pursued by a total of 40 students. What would be the overall cost of educating each student if the ice hockey program is eliminated and its cost saved?
3. For the 2016 school year, Heights charges an annual fee of $1,000 for any student who wants to play ice hockey. As a result, 10 of the less-motivated students drop the sport. Assuming the costs of the school in 2016 are the same as in 2015, what is the overall cost of educating each student in 2016?
4. Consider the costs of the academic instruction activity and assume they are fixed in the short run. At these costs, Heights could serve 600 students. What is the cost of the academic instruction resources used by Heights' current 500 students? What is the cost of unused academic instruction capacity? What actions can Smith take to reduce the cost of academic instruction per student in the short run? In the long run?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133138443

7th Canadian Edition

Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham

Question Posted: