Fundamentals of Cost Accounting
6th Edition
ISBN: 9781260708783
Author: LANEN, William
Publisher: MCGRAW-HILL HIGHER EDUCATION
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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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Kentfield Advisory Services (KAS) is a large management consulting firm organized into two groups: Governmental Services (GS) and
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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
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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…
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.)
Lamothe Solutions is a management consulting firm. Its Business Division advises firms on the adoption and use of
financial systems. Civic Division consults with state and local governments. Civic Division has a client that is interested in
implementing a new costing system in its public works department. The division's head approached the head of Business
Division about using one of its associates. Corporate Division charges clients $770 per hour for associate services, the
same rate other consulting companies charge. The Civic Division head complained that it could hire its own associate at
an estimated variable cost of $370 per hour, which is what Business pays its associates.
Required:
a. What is the maximum price that Civic Division should pay?
b. What is the maximum transfer price that Business Division should obtain for its services, assuming that it is operating at
capacity?
Chapter 12 Solutions
Fundamentals of Cost Accounting
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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