Question 4 KLA Limited ("KLA") provides professional services to its customers, Service A and Service B. Each service is identified as having the following direct costs. Service A () Service B () Key deliverable 1,000 2,200 Preparation and conclusion 750 1,450 KLA currently calculates the overhead cost per service by taking the overhead and dividing it by the total number of services. Using this method, the cost per service is as follows: Service A Service B Overhead cost per service 1,965.70 4,245.65 KLA is considering implementing an activity based costing ("ABC") system and the company is therefore investigating whether using ABC would bring benefits. Further analysis of service delivery in the prior year indicated the following additional data. Cost Cost driver Administrative costs Administration time per service 1,680,000 Marketing costs Number of leads 357,400 Key service costs Number of customers 4,689,745 Service A 4,500 2 Service B 8,350 3.5 Number of services Administration time per service (hours) Leads per service (number) Number of customers per service 20 45 25 40 Question 4 KLA Limited ("KLA") provides professional services to its customers, Service A and Service B. Each service is identified as having the following direct costs. Service A () Service B () Key deliverable 1,000 2,200 Preparation and conclusion 750 1,450 KLA currently calculates the overhead cost per service by taking the overhead and dividing it by the total number of services. Using this method, the cost per service is as follows: Service A Service B Overhead cost per service 1,965.70 4,245.65 KLA is considering implementing an activity based costing ("ABC") system and the company is therefore investigating whether using ABC would bring benefits. Further analysis of service delivery in the prior year indicated the following additional data. Cost Cost driver Administrative costs Administration time per service 1,680,000 Marketing costs Number of leads 357,400 Key service costs Number of customers 4,689,745 Service A 4,500 2 Service B 8,350 3.5 Number of services Administration time per service (hours) Leads per service (number) Number of customers per service 20 45 25 40