A consulting firm has two departments, Corporate and Government. Computer support is common to both departments....

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A consulting firm has two departments, Corporate and Government. Computer support is common to both departments....

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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 $14.24 million. The following information is given:

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?

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 ago

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Gigabytes of Storage

Number of Consultants

Government

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