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I want a detailed explaination for just Part 4. part 1 to 3 are already solved by me.

CASE 7-26 Comprehensive Activity-Based Costing 102, 103, Gros Kolbec Community College (KCC) has 4.000 full-time students and offers a variety of academic programs in three areas: professional studies, arts, and technology. The professional studies programs prepare students for administrative and clerical jobs in a variety of professional settings, including accounting medicine, and law. The arts program's offerings are wide ranging and include graphic design, digital animation. culinary arts, cosmetology, and music arts. The technology programs are also varied. including information technology, medical laboratory technology. electrical engineering technology, pharmacy technology, and natural resources technology The chief financial officer of KCC. Lynn Jones, has consistently emphasized to other members of the senior management team the importance of understanding the costs of delivering the various academic programs. To that end, the costing system used at KCC tracks the direct costs of cach program, which are shown below on an annual basis, along with the number of fulltime students: Item Total Full-time students Professors salaries Administrative salaries Supplies Teaching support Facilities Total direct cost Professional Studies 2.000 $1,260.000 105,000 40.000 160,000 275.000 $1.840,000 Arts 1,000 $ 650.000 70,000 150.000 100.000 150,000 $1.120.000 Technology 1.000 $ 780,000 70,000 50.000 80.000 175.000 $1,155.000 4.000 $ 2.690.000 245,000 240.000 340.000 600.000 $ 4,115.000 It is very important to understand the overhead costs consumed by ench academic program at KCC in determining the full cost of operating the programs. Central administration at KCC allocates financial resources to academic programs based on the estimated full cost per student of delivering the program. The overhead costs at KCC are significant, totalling over 60% of direct costs. Total annual overhead costs at KCC are as follows: Cou Administrative salaries Facility costs Office expenses Total overhead costs $ 900.000 1.300.000 302 000 $2,500,000 Traditionally, KCC has allocated overhead costs to academic programs on the basis of the number of full-time students in each program. This approach was deemed appropriate since Jones reasoned that increasing the number of students at KCC would result in higher overhead costs (c.8., more facilities would be needed, more indirect support costs would be incurred, etc.). However, Jones is beginning to question the accuracy of the traditional approach since it results in a similar full cost per student for the arts and technology programs, which she feels doesn't make sense. Based on her knowledge of the programs. Jones feels that the technology program is probably more expensive to deliver than the arts program, but this does not come through in the traditional costing approach Jones recently attended a seminar on management techniques being used by leading educational institutions that, among other topics. covered the basics of the ABC approach. She likes the idea of being able to assign indirect costs to academic programs on the basis of how much of the support activity resources are consumed by each prograin. If Jones's instincts are correct in that some programs consume more resources of certain activities than others, this could have a significant impact on the overhead costs assigned to each under the ABC approach Upon returning to KCC. Jones decides to implement ABC, She, along with Assistant CFO James West, begins by identifying Page 285 the key activities used to support the teaching programs. Rather than getting too detailed with respect to identifying activities in the initial implementation. Jones decides to keep the process manageable and comes up with six key activities. Next, based on a interviews with various KCC employees who work in the departments covered by the identified activities, Jones and West est percentage of the total administrative, facility, and office expense resources consumed by each activity. Again, to keep the pre efficient. Jones rounds all percentages to the nearest 5%, figuring that a "close enough* approach will suffice for this initial implementation and recognizing that the estimates are subjective to begin with. The results are shown below: MA @ A Window ed @ Search Page 3 of 4 Activity Central administration Information systems technology Student counselling services Human resources Library operations Registrar's office Total Resource Distribution across Acties Administrative Facilities 20% 5% 20% 15% 5% 10% 5% 20% 60% 25% 10% 100% 100% 53 Office 15% 15% 10% 10% 30% 20% 100% Working with key personnel from each of the six activities shown above. Jones and West then identify the activity measure and the quantity of that measure used for each teaching program. Fortunately, KCC implemented an enterprise resource planning system a few years ago, which is already tracking much of the information needed regarding the activity measures and the specific quantities for each academic program: Measure Professional Arts Activity Central administration Information systems technology Student counselling services Human resources Hours spent on program Processing hours Number of students counselled Number of admin.staff and faculty members 6,000 6,000 180 7.000 3,000 115 Technology 7.000 12.000 205 Library operations Registrar's office Number of library circulations Full-time students 21 6,000 000 IS 3.000 1,000 1.000 BE Required 1. Using the traditional approach to assigning overhead costs to academic programs: a. Calculate the predetermined overhead rate. b. Assign the overhead costs to each academic program using the predetermined rate. c Calculate the total cost per student (direct costs plus overhead) of operating cach academic program. 2. Using ABC.complete the following requirements: a Using Exhibit 7-7 as a guide, complete the first stage allocation of overhead costs to academic programs. 6. Using Exhibit 7-8 as a guide, calculate the activity rates for each of the activity cost pools. Using the activity rates calculated in (b), complete the second stage allocation of overhead to academic programs. 3. Based on the results of (2), calculate the total cost per student (direct costs plus overhead) of operating each academic program. 4. Draft a memo to Jones explaining the key reasons for differences in the total cost per student of operating each academic program that arise between the traditional costing approach and ABC. ELE 7 7