Question

Indirect cost group	Direct costs
Facilities	$5,212,544
City Admin	$1,475,241
Departments
Fire	$45,218,534
Water	$35,248,612
Parks	$15,025,842

Boomtown is preparing a cost analysis of three departments: Parks, Fire, and Water. To comply with accuracy standards in allocating indirect costs, Boomtown will employ the step-down method of cost allocation. There are two indirect cost groups that are allo-cated: city administration and facilities. Costs for facilities are allocated first, and then costs for city administration are allocated. Using the data in Table 5.5, prepare the cost allocation using direct cost as the base and determine the full cost of the departments.

Answer 1

			Department
			Fire	Water	Park	Total
			A	B	c	D= A+B+C
		Direct Cost	45,218,534	35,248,612	15,025,842	95,492,988
	E=	% As of Total	47.35%	36.91%	15.74%	100.00%
		A/d, B/D, C/D
	Indirect cost
f= e* Cost	Facilities	5,212,544	2,468,281.73	1,924,067.36	820,194.91	5,212,544
g= E*Cost2	City Admin	1,475,241	698,566.84	544,544.67	232,129.49	1,475,241
	Total Department cost		48,385,382.58	37,717,224.03	16,078,166.39	102,180,773
	Direct cost + Indirect allocated cost