Question

29)

Troglodyte University uses activity-based costing to assign indirect costs to academic departments, using three activities. The activity base, budgeted activity cost, and estimated activity-base usage for each activity are identified as follows:

Activity	Activity Base	Budgeted Activity Cost	Activity-Base Usage
Facilities	Square feet	$800,000	80,000	square feet
Instruction	Number of course sections	1,200,000	600	sections
Student services	Number of students	290,000	2,500	students

The activity-base usage associated with the Archaeology and Geology departments is as follows:

Department	Facilities		Instruction		Student Services
Archaeology	8,000	square feet	8	sections	150	students
Geology	5,200	square feet	15	sections	200	students

a. Determine the activity rate for each activity.

Activity	Activity Rate
Facilities	$	per sq. ft.
Instruction	$	per section
Student services	$	per student

b. Determine the total activity cost for the Archaeology Department.

Total activity cost

$

Answer 1

Solution

Requirement a

	Activity rate
Facilities	$          10.00	Per square feet
Instruction	$    2,000.00	Per course section
Student services	$       116.00	Per student

Requirement b

Total activity cost = $113,400

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Facilities	Number of square feet	$ 800,000	80000	$             10.00	Per square feet
Instruction	Number of Course section	$ 1,200,000	600	$       2,000.00	Per Course section
Student services	Number of student	$ 290,000	2500	$          116.00	Per student

.

Cost assigned to Archaeology department
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Facilities	$           10.00	8,000.00	$ 80,000.00
Instruction	$     2,000.00	8.00	$ 16,000.00
Student services	$        116.00	150.00	$ 17,400.00
Total Overheads assigned			$       113,400.00