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but #17 11 Drivers ge School of Business is divided into three departments Accounting, ment. Relevant information for each of the departments follows Vulcan College Sche and management. Rele Cast Driver ents: accounting, marketing, Accounting Number of classes per semester Mating Management Number of classes per semester Number of professors 300 Vulcan is a private departments for p department. Depa a private school that expects each department to generate a profit. It rewards ments for profitability by assigning 20 percent of each department's profits back to that ent. Departments have free rein as to how to use these funds. Some departments have with computer technology. Others have expanded their travel The practice has been highly successful in motivating the faculty to control com nues and direct costs for the year 2011 follow: used them to supply professors with con budgets. The practice has Accounting Marketing M Revenue Direct costs 529,600,000 24,600,000 $16,600,000 13,800,000 $3,300,000 8,600,000 Vulcan allocates to the School of Business $4,492,800 of indirect overhead costs such as administrative salaries and the costs of operating the registrar's office and the bookstore. Required a. Assume that the dean of the school is planning to assign an equal amount of the college overhead to each department. You have been appointed by the faculty of the Accounting Department to evaluate the allocation plan suggested by the dean. 1. Are you in favor of or opposed to the allocation plan suggested by the dean? 2. Does the plan suggested by the dean provide a fair allocation? Why? b. Select the cost dri Select the cost driver (allocation base) that best serves the self-interest of the Accounting Department and results in the lowest amount of indirect cost allocated. 135 c. Determine cost driver that best Janine the amount of the indirect cost to be alleda denartment using bent using the driver that best serves the self-interest of the Accounting Departmcat. Show Come statement that would result for each department income statem st of the Acated to each department ng Department. Show the Suggest a method to allocate indirect costs that would promote faimess rather than interest for the College of Business