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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 each program, which are shown below on an annual basis, along with the number of fulltime students: Total 4,000 $ $ Item Full-time students Professors' salaries Administrative salaries Supplies Teaching support Facilities Total direct cost Professional Studies 2,000 1,295,000 112,000 47,000 167,000 289,000 1.910,000 Arts 1,000 $ 664,000 73,500 157,000 103,500 157,000 $ 1,155,000 Technology 1,000 794,000 73,500 53,500 87,000 182,000 1.190,000 $ 2,753,000 259,000 257,500 357,500 628,000 $ 4,255,000 $ It is very important to understand the overhead costs consumed by each 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: Cost Administrative salaries $ 930,000 Facility costs 1,340,000 Office expenses 310,000 Total overhead costs $2,580,000 Traditionally, KCC has allocated overhead costs to academic programs on the basis of the number of Fulltime 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 (e.g., 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. ad 12:23 O 100% TO 9