Question 1
Describe methods which may be used to allocate support costs within organizations containing multiple support departments. Discuss advantages and disadvantages of the various methods.
Question 2
Gotham University offers only high-tech graduate-level programs. Gotham has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Technology Maintenance and Enrollment Services. The base used to allocate facility and technology maintenance is budgeted total maintenance hours. The base used to allocate enrollment services is number of credit hours for a department. The Facility and Technology Maintenance budget is $350,000, while the Enrollment Services budget is $950,000. The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
| | Services Provided: (Annually) |
| | Budget | Engineering | Computer Sciences | F&T Maintenance | Enrollment Service |
| Engineering | $3,500,000 | | | | |
| Computer Sciences | $1,400,000 | | | | |
F&T Maintenance
(in hours) | $350,000 | 2,000 | 1,000 | Zero | 5,000 |
Enrollment Service
(in credit hrs) | $950,000 | 24,000 | 36,000 | 2,000 | Zero |
Required:
a. Set up algebraic equations in linear equation form for each activity.
b. Determine total costs for each department by solving the equations from part (a) using the reciprocal method.
(Engineering= Eng; Computer Sciences = CS; Facility and Technical Maintenance = FTM; Enrollment Service = ES)
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