The Consummate Consulting Company (CCC) offers a range of consulting services, grouped into Strategic, Technology, Cost, Marketing, and Personnel. The company allocates the cost of supporting personnel (e.g., the cost to process payroll, maintain HR policies, and so on) to user groups based on head count (i.e., the number of persons employed in the consulting group).The following data pertain to the most recent year.

At the current staffing level of 150 employees, CCC estimates that providing staff services costs $12,250 per month. CCC expects personnel administration costs to increase to $12,875 if staff size increases to 175 persons; likewise, costs would decrease to $11,625 if employment were to drop to 125 persons only.

Required:
a. Allocate the current costs to the five consulting groups in proportion to their current staffing levels.
b. The Cost Management group recently lost a subgroup that focused on Business Process Outsourcing. The group previously had 20 persons instead of the 12 persons now employed. Compute the cost prior to the drop-off in staffing. Compute the costs allocated to the Strategic Management group (which had no change in staffing levels) before and after the change in staffing levels for the Cost Management group.
c. How could CCC modify its allocation procedures to reduce the effect of actions in one group affecting the costs allocated to othergroups?

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Group Strategic Manage- ment 25 Cost Man Marketing Personnel Mange- Manage Technol Manage g ageinent ment ment ment Staffing 45 12 50 18