In the past, allocations have been based on headcount (the number of employees in each business unit). Software had 375 employees and consulting had 125 employees. The new controller of Marshall.com believes that the key driver of employee benefits and telecommunications costs is headcount. However, rent is driven by space occupied, and general and administrative costs are driven by relative sales. Marshall.com rents 36,800 square feet; approximately 18,400 is occupied by software employees and 18,400 by consulting personnel.

Marshall.com sells software and provides consulting services to companies that conduct business over the Internet. The company is organized into two lines of business (software and consulting), and profit statements are prepared as follows: Sales Less direct costs Less allocated costs Software $13,800,000 5,520,000 4,830,000 $3,450,000 Consulting $9,200,000 3,680,000 1,610,000 $3,910,000 Income before taxes Direct costs include costs that are easily associated with each line of business. For software, this includes the salary of programmers, the cost of computers used by programmers, and the cost of software manuals sold to customers. For consulting, direct costs include consultant salaries, computer costs, and travel costs. Allocated costs include costs that are not directly traced to the business units. These costs include employee benefits, rent, telecommunications costs, and general and administrative costs, such as the salary of the CEO of Marshall.com. At the start of 2020, allocated costs were estimated as follows: Employee benefits Rent Telecommunications General and administrative costs Total $2,300,000 920,000 460,000 2,760,000 $6,440,000