E8.23 LO8.5 8.6 Activity-based costing: service firm Brian Jones, the manager of Walkabout 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 Insure participants Cook meals Guide walkers Activity driver No. of trips Destination No. of person-days No. of people No. of person-days Distance walked Cost per unit of activity driver $75 per trip $150 per group permit issued $30 per person per day $7.50 per person $37.50 per person per day $10.50 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, Brian had estimated the average cost of all trips at $97.50 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