TenBob provides coaching and mentoring services to sportspeople and clubs in Australia. Their focus is on football and cricket. The standard fee is AUD400 for a one hour session and TenBob offers around 5,600 sessions per year. The coaches and mentors are hired on an hourly basis and are paid AUD175/hour.Other costs involved in delivering the services are around AUD500,000 pa as follows:

• Admin & finance cost: AUD50,000
• Marketing cost: AUD250,000
• Relationship management cost: AUD200,000

TenBob has 47 sports clubs as clients and provides services to approximately 460 sportspeople. Three clients are as follows:

• Melbourne Football Club (Melbourne) 92 sessions delivered (football)
• Carlton Cricket Club (Carlton) 193 sessions delivered (cricket)
• St Kilda Football Club (St Kilda) 110 sessions delivered (football)

1. If TenBob allocates the AUD500,000 of other costs based on numbersessions delivered. What will be the profit per club and profit per session for each of Melbourne, Carlton & StKilda?
2. Now assume TenBob allocates the AUD500,000 of other costs based on number of clients. What will be the profit per club and profit per session for each of Melbourne, Carlton & StKilda?

An analyst educated at a famous business school in London was recently hired by TenBob.The analyst discovered the following:

• Admin & marketing cost seems to be driven by number of sessions.For example, a club that requires 100 sessions per year generally involves about double the admin & finance cost of a club that requires 50 sessions per year
• The marketing seems to vary by type of club. Of TenBobs 47 clients, 30 are football clubs and they account for about 33% of the total marketing spend. The remaining 67% of marketing is in respect of 17 cricket clubs
• The relationship management costs generally apply at a per client level it doesnt matter whether a club is a big or small client of TenBob, the company tries to provide about the same level of relationship management support

1. Based on the above information, use activity based costing to determine the profit per club and profit per session for each of Melbourne, Carlton & StKilda
2. Which costing system would you recommend allocation based on number of sessions delivered, allocation based on number of client clubs, or allocation based on Activity Based Costing?Why?