The Sales company is composed of five divisions. The company has an information technology support team (ITST) which provides services to each division.<\/p>
<\/p>
Currently ITST has 15 \"consultants\" with total salary and benefits of $2,730,000.<\/p>
When a division uses ITST services, they receive an internal charge (an expense on their divisional income statement) of $108 per hour.<\/p>
This rate was calculated as total salary and benefits divided by 25,278 expected billable hours.<\/p>
The company estimates that purchasing the IT support services from an outside firm would cost approximately $150 per hour, and the divisions are generally happy with services provided.<\/p>
<\/p>
In the past year, the ITST group billed out $2,047,518.<\/p>
<\/p>
Given the ITST group did not recover its costs, the CFO, Jean, is proposing to increase the allocation (billing rate) to $144 per hour.At a recent staff meeting she justified the proposal by saying, \"Look, if the five divisions use the same amount of ITST hours in the coming year and we bill at $144, the ITST group will recover its costs of $2,730,000. I really like these service divisions to allocate out all of their expected costs!\"<\/p>
<\/p>
Question: Comment on the likely result of the proposal. Is it a good plan?<\/p>", "transcribed_text": "", "related_book": { "title": "Accounting Principles", "isbn": "1119491630, 978-1119491637, 978-0470534793", "edition": "10th Edition", "authors": "Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/54.jpg", "uri": "\/textbooks\/accounting-principles-10th-edition-54", "see_more_uri": "" }, "free_related_book": { "isbn": "1871049474", "uri": "\/textbooks\/on-shifting-sands-new-art-and-literature-from-south-africa-1st-edition-9781871049473", "name": "On Shifting Sands New Art And Literature From South Africa", "edition": "1st Edition" }, "question_posted": "2024-06-29 02:43:12", "see_more_questions_link": "\/study-help\/questions\/business-business-communication-2023-February-20", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/point-isotropic-source-generates-sound-oscillations-with", "description": "A point isotropic source generates sound oscillations with frequency v = 1.45 kHz. 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