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B E G H 0 ABC Group Assignment Kolbec Community College (KCC) has 4,000 full-time students and offers a variety of academic programs in Traditionally, KCC has allocated overhead costs to academic programs on the basis of the number of Working with key personnel from each of the six activities shown three areas: professional studies, arts, and technology. The professional studies programs prepare students Fulltime students in each program. This approach was deemed appropriate since Jones reasoned that the activity measure and the quantity of that measure used for ea for administrative and clerical jobs in a variety of professional settings, including accounting, medicine, and increasing the number of students at KCC would result in higher overhead costs (e.g., more facilities KCC implemented an enterprise resource planning system a few y aw. The arts program's offerings are wide ranging and include graphic design, digital animation, culinary arts, would be needed, more indirect support costs would be incurred, etc.). However, Jones is beginning to much of the information needed regarding the activity measures academic program: cosmetology, and music arts. The technology programs are also varied, including information technology, 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 medical laboratory technology, electrical engineering technology, pharmacy technology, and natural programs, Jones feels that the technology program is probably more expensive to deliver than the arts esources technology. Activity Measure 9 program, but this does not come through in the traditional costing approach. Central administration Hours spent on program 10 Jones recently attended a seminar on management techniques being used by leading educational The chief financial officer of KCC, Lynn Jones, has consistently emphasized to other members of the Information systems technol Processing hours 11 senior management team the importance of understanding the costs of delivering the various academic institutions that, among other topics, covered the basics of the ABC approach. She likes the idea of Student counselling service Number of students counsell 12 13 programs. To that end, the costing system used at KCC tracks the direct costs of each program, which are being able to assign indirect costs to academic programs on the basis of how much of the support Human resources Number of admin. Staff & fa activity resources are consumed by each program. If Jones's instincts are correct in that some Library operations Number of library circulati 14 shown below on an annual basis, along with the number of fulltime students programs consume more resources of certain activities than others, this could have a significant impact Registrar's office Fulltime students 15 on the overhead costs assigned to each under the ABC approach. 16 Professional Required: 17 Item Studies Arts Technology Total Upon returning to KCC, Jones decides to implement ABC. She, along with Assistant CFO James West, 1. Using the traditional approach to assigning overhead costs to acade 18 Full-Time Students 2, 000 1, 000 1, 000 4, 000 begins by identifying the key activities used to support the teaching programs. Rather than getting too a. Calculate the predetermined overhead rate. 19 detailed with respect to identifying activities in the initial implementation, Jones decides to keep the b. Assign the overhead costs to each academic program using the pred 20 Professor's salaries $ 1, 290, 000 $ 662, 000 $ 792, 000 $ 2, 744, 000 process manageable and comes up with six key activities. Next, based on a series of interviews with c. Calculate the total cost per student (direct costs plus overhead) of d 21 Administrative salaries 111, 000 73, 000 73, 000 257, 000 various KCC employees who work in the departments covered by the identified activities, Jones and program. 22 Supplies 46, 000 156, 000 53, 000 255, 000 West estimate the percentage of the total administrative, facility, and office expense resources 23 Teaching support 166, 000 103, 000 86, 000 355, 000 consumed by each activity. Again, to keep the process efficient, Jones rounds all percentages to the 2. Using ABC, complete the following requirements: 24 Facilities 287, 000 156, 000 a. Complete the first-stage allocation of overhead costs to academic p 181, 000 624, 000 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: guide. 25 direct $ 1, 900, 000 , 150, 000 ##########|$ 4, 235, 000 b. Calculate the activity rates for each of the activity cost pools, using 26 your answers to 2 decimal places.) 27 It is very important to understand the overhead costs consumed by each academic program at KCC in c. Using the activity rates calculated in (b), complete the second stage 28 determining the full cost of operating the programs. Central administration at KCC allocates financial source Distribution across Activiti academic programs. 29 resources to academic programs based on the estimated full cost per student of delivering the Activity iministration Facilities Office 30 program. The overhead costs at KCC are significant, totalling over 60% of direct costs. Total annual Central administration 20% 5% 20% 3. Based on the results of (2), calculate the total cost per student (dire 31 overhead costs at KCC are as follows: Informaiton systems technology 20% 15% 20% operating each academic program. (Round your answers to 2 decimal 32 Student counselling services 5% 5% 5% 33 Cost Human resources 10% 5 % 5% 34 Adminisstrative salaries $ 930, 000 Library operations 20% 65% 35% 35 Facility costs 1, 340, 000 Registrar's office 25% 59 15% 36 Office expenses 310, 000 Total 100% 00% 00% 37 Total overhead costs $ 2, 580, 000 38 39 40 41 42 43 44 45 46 47 48 ABC Question Req. 1 Req. 2 Req. 3H K N 0 P R S T U V Traditionally, KCC has allocated overhead costs to academic programs on the basis of the number of Working with key personnel from each of the six activities shown above, Jones and West then identify Fulltime students in each program. This approach was deemed appropriate since Jones reasoned that the activity measure and the quantity of that measure used for each teaching program. Fortunately, increasing the number of students at KCC would result in higher overhead costs (e.g., more facilities