Xyberspace Case Questions Transfer Pricing In preparation for our case discussion, please answer the following questions: 1. What are the concerns/ complaints about the current method of allocating costs with the Training and Educational Services Group (TESG) to the Consulting Group and the Customer Care Group? 2. Identify and label each TESG cost as either a fixed cost or a variable cost. Consider a cost variable if it varies with the number of training sessions (i.e., trainee-weeks). Otherwise, consider it a fixed cost. 3. Prepare an allocation of TESG costs using the following allocation methods: 1. Develop a budgeted allocation rate using budgeted costs and budgeted usage. Use this budgeted rate to allocated costs to the Consulting Group and the Customer Care Group (i.e. user groups) based on actual usage. 2. Develop an allocation rate for fixed costs using budgeted costs and actual usage. Use this rate to charge fixed costs to user groups based on actual usage. Develop a budgeted allocation rate

Fixed Costs				Variable Costs
	Budget	Actual			Budget	Actual
Salaries				Travel	8,800.00	12,000.00
Rose	75,000.00	75,000.00		Professional develop.	10,000.00	22,500.00
Joners	47,000.00	50,000.00		Phone/Fax	2,600.00	3,800.00
Chen	48,000.00	51,000.00		Training/supplies	67,500.00	64,775.00
Ivanov	55,000.00	57,000.00		Trainee Lunch	45,000.00	56,250.00
Hickery	25,000.00	32,000.00		Total variable costs	133,900.00	159,325.00
Total salaries	250,000.00	265,000.00
Benefits	50,000.00	53,000.00			497,700.00
SW License	20,000.00	27,500.00
Depreciation	28,000.00	28,000.00
Maintenance Contract	2,000.00	2,000.00
Course Development	12,500.00	12,500.00
Office Supplies	800.00	800.00
Other	500.00	500.00
Total fixed costs	363,800.00	389,300.00