A local government authority is organized so that some operating departments (e.g. building, transport, printing, catering) supply services to several functional departments (e.g. education, recreational facilities, road works, fire service).

At present the total cost of each service department is allocated on a simple proportional basis to user departments.

As an aid to cost control the authority has decided to charge the user departments for these services on the basis of cost or market price whichever is the lower.

You are required to prepare but not to deliver a Powerpoint presentation to the committee that addresses the following questions:

(a) Indicate the benefits likely to arise from this decision. You should use one slide to answer this question.

(b) Outline the problems you expect may be encountered in putting the decision into practice. You should use one slide to answer this question.

(c) State how these problems might be overcome. You should use one slide to answer this question.