A service company adopts ABC for cost allocation: Administrative activities $150,000 (1,000 activities), Customer service $100,000 (500 customers), Marketing $50,000 (10 campaigns).

• Requirements:
  • Calculate the activity rate for each cost pool using ABC.
  • Allocate costs to different service departments based on activity usage.
  • Prepare a cost allocation report using ABC principles.
  • Recommend cost management strategies based on ABC insights.
  • Discuss how ABC enhances cost transparency and resource allocation in service industries.