A consulting firm has two departments. Corporate and Government. Computer suppor

Question

A consulting firm has two departments. Corporate and Government. Computer support is common to both departments. The cost of computer support is $2.91 million. The following information is given: Required: What is the cost allocation if fixed computer costs of $1.68 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? (Do not round intermediate calculations. Round final answers to the nearest dollar amounts.)

Explanation / Answer

Solution-

Calculation-

Corporate (Fixed) = (220/220+72)*1,680,000

Corporate (Fixed) = $1,265,753

Corporate (Variable) = (37,500/37,500+25,900)*(2,910,000-1,680,000)

Corporate (Variable) = $727,524

Goverment (Fixed) = (72/220+72)*1,680,000

Goverment (Fixed) = $414,247

Goverment (Variable) = (25,900/37,500+25,900)*(2,910,000-1,680,000)

Goverment (Variable) = $502,476

Corporate Goverment Fixed $1,265,753 $414,247 Variable $727,524 $502,476 Total $1,993,277 $916,723

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