Baulkham Hills Shire Council owns and operates an animal shelter that provides the following services:

1. housingandfindinghomesforstrayandunwantedanimals,

2. providinghealthcareandnurturingservicesfortheanimals,and 3. pettrainingservices.

The operations are undertaken in three different facilities each dedicated for its own purpose as below:

1. Oneisdedicatedtohousinganimalswaitingtobeadopted.

2. Thesecondfacilityhousesveterinarianservices.

3. Thethird,housesthedirector,hisstaff,andseveraldogtrainers.Thisfacilityalsohas

several large meeting rooms that are frequently used for classes given by the animal trainers.

The trainers work with all of the animals to ensure that they are relatively easy to manage. They also provide dog obedience classes for adopting families. Estimated annual costs for the animal shelter and its services are as follows:

Director and staff salaries

Animal shelter employees' salaries Veterinarians and technicians Animal trainers

Food and supplies Building-related costs

$120,000 200,000 300,000 80,000 250,000 400,000

On average, 150 animals per day are housed at the facility, or about 54,750 (150 x

365) animal days in total. The number of animals housed during the year totalled 9000. In addition, the trainers offer about 250 classes during the year. On average, 20 families attend each class. Last year the veterinarian clinic experienced 10000 animal visits.

You have been newly appointed as one of the Director's staff members and have been asked to set up an ABC system for the shelter so that the Director can better understand the cost for each of the shelter's services. You gather the following information:

Square footage for each facility:

Animal shelter

Director and training

Veterinarian clinic

Percentage of trainer time used in classes Supplies used for veterinarian services

10000 square feet 6000 square feet 4000 square feet 50%

$150,000

4

REQUIRED:

Make an Executive Report to advise the Director on the results of an analysis of the costing system and the introduction of an ABC system. Your report should include the following:

1. Showhowyouidentifiedcostpoolsandassignedcoststothem,consideringthe three cost objects of interest.

2. Howdidyoudetermineacostdriverforeachcostpoolandexplainyourchoice.

3. Calculatetheallocationratesforeachcostpoolandcostdriver.Interpretthe

allocation rate for each cost pool (i.e., explain what it means).