=+13-24 K Allocation of common costs OBJECTIVE 4 Angela Stonely, a self-employed consultant in Brisbane, received an
Question:
=+13-24 K Allocation of common costs OBJECTIVE 4 Angela Stonely, a self-employed consultant in Brisbane, received an invitation to visit a prospective client in Adelaide. A few days later, she received an invitation to make a presentation to a prospective client in Christchurch, New Zealand. She decided to combine her visits, travelling from Brisbane to Adelaide, and Adelaide to Christchurch.
Stonely received offers for her consulting services from both companies. Upon her return, she decided to accept the engagement in Adelaide. She is puzzled over how to allocate her travel costs between the two clients. She has collected the following data for regular return-trip fares with no stopovers:
Brisbane to Adelaide $470 Brisbane to Christchurch $730 532 Chapter 13: Allocation of support-department costs, common costs and revenues M13_HORN3377_02_LT_C13.indd 532 2/09/13 3:53 PM Angela paid $1200 for her three-leg flight (Brisbane–Adelaide–Christchurch–Brisbane). In addition, she paid $50 each way for taxis from her home to Brisbane Airport and back when she returned.
Required 1 How should Angela allocate the $1200 airfare between the clients in Adelaide and Christchurch using:
(a) the stand-alone costallocation method,
(b) the incremental cost-allocation method and
(c) the Shapley value method?
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan