Question 1

Describe the current method of allocating cost associated with training and education services
group to the consulting and customer care group.

Answer: Currently the company uses single rate method that just accounts for the total cost and
total sessions conducted for cost of one session and then allocates the costs to both divisions based
on their utilized sessions.

Question 2

What are the complaints about the current method of allocating cost associated with training and
education services group to the consulting and customer care group?

Answer:

Question 3

Prepare an allocation of training and education services group’s cost using the following
alternative methods.

(a) Develop a budgeted allocation rate using budgeted cost and budgeted usage. Use this
budgeted rate to allocate cost to user groups based on actual usage.
 (b) Separate Training costs into fixed and variable costs. Consider the cost as variable if it
varies with the number of training sessions (Training weeks), otherwise consider it to be
fixed.

Answer:

(a)

(b)
Develop an allocation rate for fixed cost using budgeted cost and actual usage. Use this rate to
charge fixed cost to user groups based on actual usage ... Develop an allocation rate for variable
cost using budgeted cost and budgeted usage, use this budgeted rate to charge variable cost to
user groups based on actual usage
3 (C) Develop an allocation rate for fixed cost using budgeted cost and budgeted usage. Use this
rate to charge fix cost to user groups based on budgeted usage. Variable cost relocation remains
same as 3 (b)
Question 4

Evaluate whether each allocation method addresses concerns about the current allocation method
that you identified in Question 1.