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Red Cross Activity Based Costing: Lowering Cost per Pint

MGRACT-HU1VET

The Red Cross conducts blood drives to collect blood for medical procedures as part of their mission to save lives. Their costs associated with the blood drives include medical supplies ($11 per donor), contract nursing (six hours per drive), scheduling labor (six hours per drive) and public awareness campaigns (fixed monthly cost). The biggest difference in blood drives is the number of "givers" (blood donors) who attend each drive.

The Red Cross wants to learn whether blood drives through employers or local churches are more cost effective (lower cost per pint collected) to decide how to concentrate their promotional efforts in the upcoming year.

Can an activity-based costing (ABC) system help them to figure out whether employers or churches are a better way to get a lower cost per pint collected?

A

Yes, given costs mentioned, ABC is likely to show that employers are more expensive per pint collected.

B

Yes, ABC will be helpful in driving down the cost per pint since it will help workers to cut down on activities.

C

Yes, ABC will separate the variable and fixed costs per drive and make it easier to figure out the cost per donor.

D

No, the best way to reduce the cost per drive is to schedule more donors rather than adopting ABC.