1. Complete the cost allocation worksheet in case Exhibit 4 2. Based on the cost allocations, determine the costs per unit of output for the three service lines: software development, professional services, and special projects.

overhead costs can be allocated using a pre-determined rate that is based on your chosen cost driver (expenses)

EXHIBIT 1: HEALTH SERVICES SOFTWARE, OPERATING BUDGET in CA$ Notes 320,000 85,000 Cost Item Salaries Senior executives (3) Software development supervisor (1) Software developers (4) Client service representatives (2) Outsourcing contracts Depreciation on equipment 280,000 130,000 12,000 6,500 Salaries for HSS executives Salary for supervisor of all software development Salaries for software development Salaries for installation services and client support Software development outsourced to other companies Annual straight-line depreciation for equipment General licences for software used by the entire company Material and software licences specific to individual clients Promotion of HSS and travel to locations for new installations and support General operating expenses at HSS All utilities: electricity, heat, water Software licences 20,000 Materials and licences 62,500 Marketing and travel 73,000 Office expenses 37,000 Utilities 24,000 Total Cost 1,050,000 EXHIBIT 2: HEALTH SERVICES SOFTWARE, COST ALLOCATION DATA Software Development Professional Services Special Projects Office 70% 10% 20% 10% 90% 0% Direct Labour (tracked with time sheets) Software developers (4) Client service representatives (2) Indirect Labour Hours Service overhead: software development supervisor (1) Administration: senior executives (3) Number of Staff Software developers (4) Client service representatives (2) 1,584 93 187 3,914 1,618 60 4 2 Physical Layout Square metres 250 40 40 EXHIBIT 3: HEALTH SERVICES SOFTWARE, KEY PERFORMANCE DATA 1,200 3 5 Number of software licences Number of new clients Number of special projects Service overhead: software development supervisor (hours) Administration: senior executives (hours) Company footprint (square metres) 1,864 5,592 330 Exhibit 4: Cost Allocation Worksheet Software in CA$ Professional Total Development Services Special Projects Direct Costs Cost 1 Materials and licenses 62,500.00 $ 23,000.00 $ 35,000.00 $ 4,500.00 Cost 2 Software Developers $ 280,000.00 $ 196,000.00 $ 28,000.00 $ 56,000.00 Cost 3 Client service representatives $ 130,000.00 $ 13,000.00 $ 117,000.00 $ Total direct costs $ 472,500.00 $ 232,000.00 $ 180,000.00 $ 60,500.00 Service Overhead Cost 1: salary for the supervisor of SD $ 85,000.00 $ 72,231.76 $ 4,240.88 $ 8,527.36 Cost 2: outsourced development cost $ 12,000.00 Cost 3 : Depreciation for the equipment $ 6,500.00 Total service overhead $ 103,500.00 Administration Cost 1 Salaries for the 3 senior executive: $ 320,000.00 $ 223,977.11 $ 92,589.41 $ 3,433.48 Cost 2 generic software licenses $ 20,000.00 Cost 3 Utilities $ 24,000.00 Cost 4 Marketing and travel $ 73,000.00 Cost 5 Office expenses $ 37,000.00 Total administration 474,000 Total Cost $ 1,050,000.00 Software Professional Overhead Application Rate Per Hour Development Special Projects Services Total service overhead rate Total administration rate Total overhead application rate Total