Refer to the chapter’s Pacific Power Company (PPC) ABC illustration.

1. One of the activity centres is Account Inquiry. Based on Exhibits 5-7 through 5-9, estimate the variable and fixed costs included in the total Account Inquiry cost, $205,332.

2. Is the cost driver used to assign Account Inquiry costs to the residential and commercial cost objects economically plausible? In other words, is there probably a cause-and-effect relationship between the cost driver and each of the five costs included?

3. Considering your answers to parts 1 and 2, is the cost driver rate per unit for Account Inquiry useful to PPC managers making the decision whether to outsource the billing function?

Exhibits 5-7

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Current Costing Based on One Overal Rate Total Indirect Cost: $565,340 Computer $178,000 Paper $7,320 Occupancy $47,000 Supervisors $33,600 Telecommunications $58,520 Prining Machines $55,000 Account Inguiry Labour $118,400 Billing Labour $67,500 # Inquiries = 23,000 18,000 (78%) 5,000 (22%) Residential Accounts ($442,440) Commercial Accounts ($122,900)