Question

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 $4 million. The following information is given:

Gigabytes of Storage Number of Consultants
Corporate 95,000 160
Government 65,000 220

Required:

a. What is the cost charged to each department if the allocation is based on the number of gigabytes of storage? (Do not round intermediate calculations. Enter your answers in thousands of dollars.)

Cost Allocation
Corporate
Government

b. What is the cost charged to each department if number of consultants is the allocation basis? (Do not round intermediate calculations. Enter your answers in thousands of dollars.)

Cost Allocation
Corporate
Government

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. Should this affect the choice of the allocation base?

Yes or No
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