FUNDAMENTAL'S OF COST ACCOUNTING LL
6th Edition
ISBN: 9781260998993
Author: LANEN
Publisher: MCG
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Chapter 12, Problem 38E
Single versus Dual Rates: Ethical Considerations
A consulting firm has two departments, Corporate and Government. Computer support is common to both departments. The cost of computer support is $9 million. The following information is given:
Required
- a. What is the cost charged to each department if the allocation is based on the number of gigabytes of storage?
- b. What is the cost charged to each department if number of consultants is the allocation basis?
- c. Most of the business in the Corporate Department is priced on a fixed fee basis, and most of the work in the Government Department is priced on a cost-plus fixed fee basis. Will this affect the choice of the allocation base? Should it?
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A consulting firm has two departments, Corporate and Government. Computer support is common to both departments. The cost of computer support is $9 million. The following information is given:
Gigabytesof Storage
Numberof Consultants
Corporate
97,500
135
Government
52,500
165
Required:
What is the cost allocation if fixed computer costs of $7 million are allocated on the basis of number of consultants and the remaining costs (all variable) are allocated on the basis of the number of gigabytes of storage used by the department? (Enter your answers in dollars, not in millions. Do not round intermediate calculations.)
Kentfield Advisory Services (KAS) is a large management consulting firm organized into two groups: Governmental Services (GS) and
Commercial Support (CS). Corporate information technology (IT) services support both groups. The cost of computer support is $47
million. The following information is given:
Governmental Services
Commercial Support
Utilization Revenues ($000)
$ 241,400
438,600
Required A
Required:
a. What is the cost charged to each group if the allocation is based on the utilization?
b. What is the cost charged to each group if revenue is the allocation basis?
c. Most of the business in Commercial Support is priced on a fixed fee basis, and most of the work in the Governmental Services
Department is priced on a cost-plus fixed fee basis. Will the allocation base selected affect the amount of revenue?
Complete this question by entering your answers in the tabs below.
Required B Required C
43%
Governmental services
Commercial Support
57
What is the cost charged to each group…
Chapter 12 Solutions
FUNDAMENTAL'S OF COST ACCOUNTING LL
Ch. 12 - What does decentralization mean in the context of...Ch. 12 - Why is performance measurement an important...Ch. 12 - Prob. 3RQCh. 12 - What does dysfunctional decision making refer to?Ch. 12 - Prob. 5RQCh. 12 - What are the five basic kinds of decentralized...Ch. 12 - What is goal congruence? How is it different from...Ch. 12 - Prob. 8RQCh. 12 - What is relative performance evaluation?Ch. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - The management control system collects information...Ch. 12 - Salespeople are often paid a commission based on...Ch. 12 - Prob. 15CADQCh. 12 - Prob. 16CADQCh. 12 - On December 30, a manager determines that income...Ch. 12 - Prob. 18CADQCh. 12 - Prob. 19CADQCh. 12 - The manager of an operating department just...Ch. 12 - In the previous chapters, we considered different...Ch. 12 - A company has a bonus plan that states that...Ch. 12 - Prob. 23CADQCh. 12 - Prob. 24CADQCh. 12 - Prob. 25CADQCh. 12 - Prob. 26CADQCh. 12 - Prob. 27CADQCh. 12 - Prob. 28CADQCh. 12 - Prob. 29ECh. 12 - Evaluating Management Control SystemsEthical...Ch. 12 - Prob. 31ECh. 12 - Management Control Systems and Incentives A...Ch. 12 - Prob. 33ECh. 12 - Prob. 34ECh. 12 - Prob. 35ECh. 12 - Alternative Allocation Bases: Service Bartolo...Ch. 12 - Prob. 37ECh. 12 - Single versus Dual Rates: Ethical Considerations A...Ch. 12 - Single versus Dual Rates
Using the data for the...Ch. 12 - Alternative Allocation Bases Thompson Aeronautics...Ch. 12 - Tone at the Top, Ethics Once upon a time, a major...Ch. 12 - Prob. 42ECh. 12 - Prob. 43ECh. 12 - Internal Controls Commonly in many organizations,...Ch. 12 - Evaluating Management Control Systems SPG Company...Ch. 12 - Analyze Performance Report for Decentralized...Ch. 12 - Divisional Performance Measurement: Behavioral...Ch. 12 - Prob. 48PCh. 12 - Prob. 49PCh. 12 - Cost Allocations: Comparison of Dual and Single...Ch. 12 - Cost Allocation for Travel Reimbursement Your...Ch. 12 - Incentives, Illegal Activities, and Ethics An...
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