Question
In: Accounting
A consulting firm has two departments, Corporate and Government. Computer support is common to both departments....
A consulting firm has two departments, Corporate and Government. Computer support is common to both departments. The cost of computer support is $14.24 million. The following information is given:
| Gigabytes of Storage | Number of Consultants | |||||
| Corporate | 95,400 | 130 | ||||
| Government | 47,600 | 165 | ||||
Required:
What is the cost allocation if fixed computer costs of $10.23 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?
Solutions
Expert Solution
Total Fixed costs = $10,230,000
Total Variable costs = ($14,240,000 - $10,230,000) = $4,010,000
Fixed cost allocation of customer support cost
Fixed costs are allocated on basis of number of consultants.
Total number of consultants = 130 + 165 = 295
Fixed cost allocated to Corporate = $10,230,000 * 130 / 295 = $4,508,135.59
Fixed cost allocated to Government = $10,230,000 *165 / 295 = $5,721,864.41
Variable cost allocation of customer support cost
Variable costs are allocated on basis of no. of gigabytes of storage
Total number of Gigabytes of storage = (95,400 + 47,600) = 143,000
Variable costs allocated to Corporate = $4,010,000 * 95,400 / 143,000 = $2,675,202.80
Variable costs allocated to Government = $4,010,000 * 47,600 / 143,000 = $1,334,797.20
| Variable Cost | Fixed Cost | Total Cost | |
| Corporate | $2,675,202.80 | $4,508,135.59 | $7,183,338.39 |
| Government | $1,334,797.20 | $5,721,864.41 | $7,056,661.61 |
| Total | $4,010,000 | $10,230,000 | $14,240,000 |
ekkarill92 answered 1 year agoRelated Solutions
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