Acg 5075 – Accounting Case
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ACG 5075 Team Assignment 1
Q1. Describe the current method of allocating costs associated with TESG to the Consulting and Customer Care groups.
Current method is to use budgeted total costs and budgeted usage to develop a budgeted allocation rate, and use this rate to allocate costs to user groups based on budget usage; And to use actual total costs and actual usage to develop a actual allocation rate, and use this rate to allocate costs to user groups based on actual usage.
Q2. What are the concerns/ complaints about the current method of allocating costs associated with TESG to the Consulting and Customer Care groups?
The main complaint about the current method of allocating cost to the Consulting and Customer Care groups is these two groups are using different services, but they are charged by the same service fee; it is not fair for the group which used the less service.
Another complaint is the current method is charging the fixed cost and variable cost as a lump sum together; there may be some problems with using lump sums. If the company allocates the fixed costs on the basis of long-range plans, it is easy to make managers underestimate their planned usage and obtain a smaller fraction of the cost allocation.
Q3. Prepare an allocation of TESG costs using the following alternative allocation methods
Budget
Actual
Salaries
Rosenthal-Manager
$ 75,000
Jones-Trainer
$ 47,000
Chen-Trainer
$ 48,000
Ivanov-Trainer
$ 55,000
Hickery-Assistant
$ 25,000
Total salaries
$ 250,000
Benefits
$ 50,000
Software licenses
$ 20,000
Depreciation
$ 28,000
Maintenance contract
$ 2,000
Course development
$ 12,500
Professional development
$ 10,000
Travel
$ 8,800
Phone/Fax
$ 2,600
Office supplies
$ 800
Training supplies
$ 67,500
Trainee lunches
$ 45,000
Other
$ 500
Total
$ 497,700
Number of training sessions
Consulting group
Customer care group
Total
Allocation rate per training session
$ 553.00
Budgeted allocation of training group costs to:
Consulting group
$ 331,800.00
$ 331,800.00
Customer care group
$ 165,900.00
$ 124,425.00
Fixed cost
Salaries:
Rosenthal-Manager
$ 75,000
Jones-Trainer
$ 47,000
Chen-Trainer
$ 48,000
Ivanov-Trainer
$ 55,000
Hickery-Assistant
$ 25,000
Total salaries
$ 250,000
Benefits
$ 50,000
Software licenses
$ 20,000
Depreciation
$ 28,000
Maintenance contract
$ 2,000
Course development
$ 12,500
Professional development
$ 10,000
Travel
$ 8,800
Phone/Fax
$ 2,600
Office supplies
$ 800
Other
$ 500
Total fixed cost
$ 385,200
Variable cost
Training supplies
$ 67,500
Trainee lunches
$ 45,000
Total variable cost
$ 112,500
Number of training sessions
Budget
Actual
Consulting group
Customer care group
Total
Allocation rate for fixed cost per training session
$ 466.91
Allocation rate for variable cost per training session
$ 125
Budgeted allocation of training group costs to:
fixed
variable
total
Consulting group
$ 280,145
$ 75,000.00
$ 355,145
Customer care group
$ 105,055
$ 28,125.00
$ 133,180
Total
$ 385,200
$ 103,125
Fixed cost
Salaries:
Rosenthal-Manager