management accounting

Question 1

Process costing: university enrolments

The university is

exploring the possibility of outsourcing part or all of its enrolment function. This

function involves three separate processes:

(a)

Validation, where the new student’s secondary school results are sighted and the university’s

offer of enrolment is

validated.

(b)

Student records, where the student’s study program details for the current year are entered into

the student record system.

(c)

Fees collection, where students pay their union fees and upfront course fees, if they choose to

do so.

The annua

l costs of these three processes are:

Cost

Validation

Student Records

Fees Collection

Staff salaries

$60,000

$40,000

$35,000

IT and other equipment insurance

10,000

25,000

20,000

Equipment insurance

1,000

2,100

2,000

Telephone

1,100

3,300

2,000

Data

processing

6,300

20,000

5,200

Postage

0

1,000

6,500

Consumables

3,000

35,000

9,000

Electricity

1,200

2,400

2,200

The university processes 14,000 student enrolments per year.

Required:

1.

Calculate the cost per student enrolment for each process.

(2

Marks)

2.

Calculate the total cost per student enrolment.

(2

Marks)

3.

Does the total cost per student enrolment provide a reliable estimate of the costs incurred to process

each enrolment? Explain your answer.

(2

Marks)

4.

Apart from in

forming its outsourcing decision, how might the university’s management use this

information?

(2

Marks)

5.

Would you recommend estimating service costs for all major student services in the university?

Explain your answer.

(2

Mark