You are working as a lecturer in a college. The college has different subject departments. Such as Language department, Art Department, Professional Studies department, Math Department etc. Each department is considered as a cost centre. The direct costs of each cost centre are lecturers salaries, textbooks and handouts for students. The overhead costs of the college administration are charged as a fixed percentage of teachers salaries in the cost centre. The department heads are not happy with this method. Language department argues that it is unfair for them as there is high teacher student ratio in their department due to the need for developing different language skills. Maths department says that they should not be sharing the cost of expensive technical equipment as they use only whiteboard and marker for teaching. One member of professional studies department have a knowledge about Different basis to apportion overheads. Departmental heads have made a list of following overheads and estimated cost and decided to meet the accountant to put some idea about using them.

1. Heat and light

2. Cleaning and maintenance

3. Library

4. Computing services for staff

5. Computing labs for students

6. Insurance for Building

Question 2

Required:

a) Allocate yourself a role of the head of any one of the Language department, Art Department, Professional Studies department, or Math Department. Suggest the cost driver for each of the overhead cost listed above and justify them. What are the problems of deciding the cost drivers?