Question 3 Salvator Mundi provides accounting services. The Big Clients department uses an activity- based costing system for its overhead costs and the following data have been extracted: Activity Cost Pool Direct contact with clients Support for accountants on the field Other Total Total Cost 200,899,540 67,800,040 Total Activity 48,000 hours 8,000 calls 112 clients 19,000,000 287,699,580 One of the clients has required 432 hours during the year and was charged 7,007,760. Additional support rounds (calls) for this client were estimated to be 50. Requirement a) Compute the activity rates for all the activity cost pools. 6 Marks b) Compute the margin for the client in question. 12 Marks c) Salvator Mundi is pondering the possibility to move to an alternative costing system, where all costs would be allocated on the basis of direct contact hours. Compute what the new margin for the client would be in this case. 7 Marks d) In the light of the results of points (b) and (c), briefly discuss the merits of an activity- based costing system. 5 Marks