A consulting firm has two departments, Corporate and Government. Computer support 1s common to both departments. The cost of computer support is $3 million. The following information is given:

Required

a. What is the cost charged to each department if the allocation is based on the number of gigabytes of storage?

b. What is the cost charged to each department if number of consultants is the allocation basis?

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. Will this affect the choice of the allocation base? Should it?

Transcribed Image Text:

Corporate. Government Gigabytes of Storage 37,500 25,000 Number of Consultants 200 92