Question
A firm operates two cost centers Administration ( Admin ) and Manufacturing ( Mfg ). They want to minimize cost. Admin and Mfg both need
A firm operates two cost centers Administration (Admin) and Manufacturing (Mfg). They want to minimize cost.
Admin and Mfg both need to acquire IT services
Units can either (i) purchase services together, or (ii) purchase services individually
A time study by industrial engineers from Headquarters (HQ) determines that 40% of IT is done in Admin and 60% in Mfg
Admin and Mfg can jointly buy the services for $2,000, or Admin can individually buy services for $700 and Mfg can individually buy services for $1,400.
Using the stand-alone costing method, what would the cost allocation of IT to Admin be?
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Case And Problem Materials In Management Accounting
Authors: Tony Brabazon And Tony ODea
2nd Edition
1412024315, 978-1412024310
