Northern Community College (NCC) has 4,000 full-time students and offers a variety of academic programs in three areas: professional studies, arts and technology. The professional studies programs prepare students for administrative and clerical jobs in a variety of professional settings, including accounting, medicine and law. The arts program's offerings are wide ranging and include graphic design, digital animation, culinary arts, cosmetology, and music arts. The technology programs are also varied, including information technology, medical laboratory technology, electrical engineering technology, pharmacy technology, and natural resources technology. The chief financial officer of NCC, Lynn Maple, has consistently emphasized to other members of the senior management team the importance of understanding the costs of delivering the various academic programs. To that end, the costing system used at NCC tracks the direct costs of each program, which are shown below on an annual basis, along with the number of full-time students: Item Professional Arts Studies Technology Total Full-time students 2,000 Professors' salaries $1,260,000 1,000 $650,000 1,000 4,000 $780,000 $2,690,000 Administrative salaries 105,000 70,000 70,000 245,000 Supplies 40,000 150,000 50,000 240,000 Teaching support 160,000 100,000 80,000 340,000 Facilities 275,000 150,000 175,000 600,000 Total Direct Costs $1,840,000 $1,120,000 $1,155,000 $4,115,000 It is very important to understand the overhead costs consumed by each academic program at NCC in determining the full cost of operating the programs. Central administration at NCC allocates financial resources Maple recently attended a seminar on management techniques being used by leading educational institutions that, among other topics, covered the basics of the ABC approach. She likes the idea of being able to assign indirect costs to academic programs on the basis of how much of the support activity resources are consumed by each program. If Maple's instincts are correct in that some programs consume more resources of certain activities than others, this could have a significant impact on the overhead costs assigned to each under the ABC approach. Upon returning to NCC, Maple decides to implement ABC. She, along with the Assistant CFO, James West, begins by identifying the key activities used to support the teaching programs. Rather than getting too detailed with respect to identifying activities in the initial implementation, Maple decides to keep the process manageable and comes up with six key activities. Next, base on a series of interviews with various NCC employees who work in the departments covered by the identified activities, Maple and West estimate the percentage of the total administrative, facility, and office expense resources consumed by each activity. Again, to keep the process efficient, Maple rounds all percentages to the nearest 5%, figuring that a "close enough" approach will suffice for this initial implementation and recognizing that the estimates are subjective to begin with. The results are shown below: Resource Distribution across Activities Activity Administrative Facilities Office Central administration 20% 5% 15% Information systems technology 20% 15% 15% Student counselling services 5% 5% 10% Human resources 10% 5% 10% Library operations 20% 60% 30% 3507 1.00% 2004