The Breakaway Holiday Company has overheads totalling £800,000. Until recently it had applied its overheads on a traditional volume basis, based on the number of holidays sold. It sells two major products, package tours and adventure holidays.

Required:
a Calculate to the nearest £, the overhead cost of a holiday based on the traditional volume-based method.
b Recalculate the overhead costs of both types of holiday, using an activity-based costing approach, showing how the costs differ from (a) above.
c Indicate what advantages and possible disadvantages an activitybased costing approach can bring to an organization.

Transcribed Image Text:

Total number of brochures printed per holiday Number of couriers on a holiday Type of holidays Number of holidays sold Number of enquiries Package tour Adventure 2,000 7 34 1,200 5 10 2 1