Assessment Task:
ALP and CEP Student Cost System Finance Assessment Answer

Questions

  1. What is the budgeted cost for one ALP student and one CEP student under the existing cost system in 2018?
  2. Diagram the cost system suggested by the cost study for 2018. Clearly identify the allocation bases as well as the rates used to assign costs. Is this an ABC system? Why?
  3. What is the budgeted cost for one ALP student and one CEP student under the cost system suggested by the cost study in 2018? Why are these numbers different from your answers to Question 1?
  4. Which cost system should PSB use in 2018? Assume that the tuition fees are pre-set and would not be affected by any changes in calculated costs. 
  5. Currently, PSB uses the total number of enrollment to evaluate its admissions staff. Identify one strength and one weakness of this performance measure.
  6. Exhibit 3 shows there is a significant cost overrun for direct labor. Analyze these results carefully using data provided by the case and explain what the discrepancy in direct labor costs is caused by. 
  7. In January 2019, when the actual 2018 results came in, Ms. Smith noticed that the actual fixed online platform cost is $600,000 which is much higher than the budgeted number.  She wanted to apply the concept of demonstrated capacity to further analyze the fixed cost variance for online platform.  After extensive discussions with OS employees, Ms. Smith estimated the annual demonstrated capacity for the platform is 500 class sessions.  The actual number of sessions in 2018 is 150.  To maintain tractability, Ms. Smith decided to run the analysis independent of the formal budgeting process (i.e., demonstrated capacity doesn’t affect your answers to any other question of the exam).  Conduct a fixed cost variance using the data provided above and explain each of calculated variance.
  8. Hunts College is willing to let PSB charge a 10% margin on any “reasonable” admissions cost incurred. Jennifer Smith is struggling with what exactly constitutes a “reasonable” cost so that it doesn’t drive Hunts away but at the same time it guarantees PSB’s long-term well-being. How should PSB charge Hunts College? Be specific in your answer using data provided by the case. Explain your answer.
  9. PSB is considering reorganizing its online platform operation into a separate unit and let it charge ALP and CEP for every distance session. The total capacity of PSB’s platform is 500 sessions a year. What should be the transfer price per session such that ALP and CEP would make decisions that maximize the school’s interest? Be specific in your answer using data provided by the case. Explain your answer.
  10. Compile a budgeted operating income statement for 2019.
     

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  • Uploaded By : Mitchell Lee
  • Posted on : November 29th, 2018

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