Southcott Ltd is a firm of financial consultants which offers short revision courses on taxation and auditing for professional examinations. The firm has budgeted annual overheads totaling Rs.152, 625.Untill recently the firm has applied overheads on a volume basis, based on the number of course days offered. The firm has no variable cost and the only direct costs are the consultants’ own time which they divide equally between their two courses. The firm is considering the possibility of adopting an Activity Based Costing system and has identified two overhead costs as shown below.

Details of overheads

Centre hire                                                                                         Rs.62,500

Enquiries administration                                                               Rs.27,125

Broachers                                                                                            Rs.63,100

                                                                                                               Rs.152,625

The following information relates to the past year and is expected to remain the same for the coming year.

All courses run with a maximum number of students (30), as it is deemed that beyond this number the leaning experience is severely diminished, and the same centre is hired for all courses at  a standard daily rate. The firm has the human resources to run only one course at any one time.

Required

(i)Calculate the overhead cost per course for both auditing and taxation using traditional volume based absorption costing

                                                                                         

 

(ii)Reallocate the overhead costs per course using activity based costing and explain your choice of cost driver in your answer.                                                             

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Status NEW Posted 17 May 2017 01:05 PM My Price 8.00

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file 1495028354-786725_1_636305345958621713_SOUTHSCOT-LTD-ON-16-MAY-2017.xlsx preview (118 words )

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file 1495028400-Answer.docx preview (102 words )

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