Pamela Bourjaily is a consultant. Two of Pam€™s current projects have considerable overlap, meaning that the same background research benefits both projects. The first project, from Apollo Corporation, pays cost plus 50%. The second project, from Troy Brothers, pays cost plus 30%. Apollo is a longtime customer while Troy is a future prospect, which is part of the reason for the price break.
Pam estimates that she has spent $6,000 on travel, books, and databases for work that is common to both projects. She also provides the following additional data.

Required:
a. Calculate the cost allocated to the two clients using budgeted hours as the allocation basis. Repeat the exercise using Pam€™s sales to the clients as the allocation basis and the clients€™ annual sales as the allocation basis.
b. Advise Pam on the appropriate choice of an allocationbasis.

Transcribed Image Text:

Apollo 40 Troy 40 Budgeted hours Pam's sales for the year to the clien Client's annual sales $100,000 $25,000 $50 million $200 million