Aurburn banking and loan company has a graphic design department that designs loan forms and other documents used by the company two subsidiaries, Aurburn personal y auburn business banking. The costs of the graphic department are primarily fixed and related to the salaries of the departments two employees .

Analyze:

1. assume there is no allocation of graphic design costs to the subsidiaries. jobs requested by the subsidiaries are completed promptly.How does the allocation (which is zero) compare to the opportunity cost of using design services?

2.Assume there is no allocation of graphic design costs to the subsidiaries.Jobs requested by the subsidiaries take weeks to complete, the subsidiaries often go outside the company for design services. How does the allocation (which zero) compare to the opportunity cost of using design services?

3.Assume the subsidiaries received an allocation of $60 per design hour. Jobs requested by the subsidiaries take weeks to complete; the subsidiaries go outside the company for design services rather than wait for jobs to be completed. They pay $ 80 per hour outside. How does the allocation(60 per hour) compare to the opportunity cost of using design services?

4.Assume subsidiaries receive an allocation of $ 60 per design hour. Although the graphic design department is busy, jobs requested by the subsidiaries are completed promptly .how does the allocation ($60 per design hour) compare to the opportunity cost of using design services?