E4–15 Computing Activity Rates, Assigning Costs for a Service Industry
The University of Dental Health (UDH) is a state-run university focusing on the education and training
of dentists, dental assistants, dental hygienists, and other dental professionals. The university provides
both traditional undergraduate courses to 12,000 students and continuing professional education
(CPE) courses to 8,000 practicing professionals. UDH has just hired a new controller who wants to
utilize ABC. The controller has identified three key activities performed by the university and the cost
of each of these activities:
∙ UDH has 3 buildings with a total of 200,000 square feet of classroom and facility space. Due to the
large space requirements for labs and other training facilities, the undergraduate program utilizes
170,000 square feet. Total cost, $2,300,000.
∙ UDH offers career placement services for undergraduate students, career counseling for active
professionals taking CPE courses, and other student services to both groups. Total cost, $660,000.
∙ UDH offers 1,200 different instructional courses each year, 800 of which are undergraduate courses.
Total cost, $3,360,000.
Required:
1. Select a cost driver and compute an activity rate for each of the three activities identified by the
controller.
2. Compute cost driver values and activity proportions for each group of students for each activity.
3. Determine the amount of costs assigned to each group of students and the cost per student to UDH
to provide these three key activities.