Pricing Police: An Activity-Based Costing Model of Police Services

Vaughan S. Radcliffe; Mitchell Stein; Adam Erickson

Product #:9B16B014

Supplier:Ivey

Discipline:Accounting

Setting:Canada, 2015

Details:Case (PDF) • 9 pages • 2016-10-28

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On January 17, 2015, the Ontario Provincial Police (OPP) released service cost estimates to all municipalities under its new municipal billing model. The new billing model, according to the recommendations of the auditor general, was designed to provide a more consistent, transparent, and accurate reflection of municipal servicing costs. Several mayors were not entirely sold on the new model and had their own opinion on how each municipality should be billed. Municipal officials needed consistent year-to-year service costs to accurately forecast their annual budgets. The OPP had to demonstrate the merit of the new billing model to ensure its adoption by all municipalities.

Learning Objectives

This case is suitable for graduate-level programs in cost analysis and inter-departmental cost allocation. It emphasizes the difficulties organizations face in accurately allocating costs. After completion of the case, students will be able to

identify cost drivers that reflect true cost behaviour;
recognize differing methodologies that may result in significant variations in cost allocations; and
understand cost behaviour in different environments.

Pricing Police: An Activity-Based Costing Model of Police Services

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Learning Objectives