E8.23 LO 8.5 8.6 Activity-based costing: service firm Richard Jagger, the manager of Outback Tours, uses activity-based costing to calculate the cost of the company's adventure walking trips. The company offers two basic trips: a two-day walk along the El Questro Gorge and a five-day trip to the Flinders Ranges. The activities and costs relevant to the walking trips are as follows: Activity Advertise trips Obtain national park permit Use equipment Activity driver No. of trips Destination No. of person-days Insure participants Cook meals Guide walkers No. of people No. of person-days Distance walked Cost per unit of activity driver $150 per trip $300 per group permit issued $60 per person per day $15 per person $75 per person per day $21 per kilometre The El Questro Gorge trip caters for 8 people, does not enter national parks and covers a walking distance of 50 kilometres. The Flinders Ranges trip caters for 15 people, is based in the Mt Remarkable National Park and covers 100 kilometres. Required 1. Calculate the total cost of each trip, the cost per person for each trip, and the cost per day for each trip, using the activity-based costing system. 2. Before introducing activity-based costing, Richard had estimated the average cost of all trips at $195 per person per day. (This was based on the previous year's costs, adjusted for any expected changes.) Explain how the activity-based system results in more accurate service cost estimates.