Cost Allocation Bases Are Factors That Cost Management Analysts Use

question 109

Essay

Cost allocation bases are factors that cost management analysts use to assign indirect costs to cost objects. Ideally, cost-allocation bases should reflect a cause-and-effect relationship between resource spending and use. Ideally, an Activity-Based Costing (ABC) approach will provide a more accurate and useful accounting for an organization's resources. Recent studies have found that, in spite of increasing costs and diminishing resources, very few Higher Education Institutions use the tools and techniques of an ABC cost allocation system to assign costs to academic departments. While direct costs, such as faculty salaries, are traceable to individual academic departments or courses, many indirect costs, such as facility use, computer use, and student support services, are more difficult to assign. In a traditional approach, many higher education institutions assign such costs based on a single factor, such as the number of courses taught in the university. (Source: Activity-Based Costing for Higher Education Institutions, Management Accounting Quarterly, Winter, 2001)
Required:
(a) Explain why the use of a single-cost driver such as the number of courses may result in inaccurate management information as to the cost of offering courses in individual academic departments.
(b) For each of the indirect costs listed below, identify an appropriate cost-driver that might be used to allocate costs to determine the cost of offering a single course in an academic department if an Activity-Based-Costing model were used.
∙ Computer use
∙ Facility use
∙ Student services
∙ Course design
∙ Lecturing/class meeting time
∙ Assignment grading

Explain the principle of competitive interactions and their outcomes within and between species.

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Definitions:

Hemoglobin

A protein in red blood cells responsible for transporting oxygen from the lungs to the rest of the body.

Mutation

A change in the DNA sequence within an organism's gene or chromosome, leading to diversity within species and populations.

Gene

A segment of DNA that serves as a unit of hereditary information; includes a transcribable DNA sequence (plus associated sequences regulating its transcription) that yields a protein or RNA product with a specific function.

Wobble Hypothesis

Describes the ability of some tRNA anticodons to associate with more than one mRNA codon; in these cases the 5' base of the anticodon is capable of forming hydrogen bonds with more than one kind of base in the 3' position of the codon.