Question

icy expelli colect next year? Complete this question by entering your answers in the tabs below. Required A Required 1. What cost would be allocated to the two units (Corporate and Government? 2. What total revenue would they expect to collect next year? (Do not round Intermediate calculations. Enter your answers in dollars and not in millions ( as 2.340,000). Round "percentage answers to 2 decimal places.) 2.34 million should be entered Show less Corporate 1. Direct contract hours Percentage Allocation of indirect cost Percer tage Direct cost Alloci ed indirect cost Total ost Free for Corporate) Fbc (Government Total revenue < Required A
Greenfield Consultants conducts analyses of public policy issues. The company has two units: Government (with various U. S. government agencies as the only clients) and Corporate (with several corporations as clients). Government business is charged based on the total costs (direct and indirect) plus a 15 percent fee (profit). Corporate clients are charged a fixed fee negotiated at the beginning of the project. During the planning process for the following year, the controller has estimated costs for the two units. Corporate Government Total Direct costs $ 900,000 $ 3,600,000 $ 4,500,000 Direct contract hours worked 3,000 6,000 9,000 The controller expects indirect costs to total $10.5 million next year. Revenues from Corporate clients are expected to be $3.2 million. Required: a. Suppose Greenfield chooses to allocate indirect cost based on direct cost. 1. What cost would be allocated to the two units (Corporate and Government)? 2. What total revenue would they expect to collect next year? b. Suppose Greenfield chooses to allocate indirect cost based on direct contract hours worked. 1. What cost would be allocated to the two units (Corporate and Government)? 2. What total revenue would they expect to collect next year?

Answer 1

REQUIRED A

		CORPORATE	GOVERNMENT	TOTAL
1	Direct cost	$                     900,000.00	$                   3,600,000.00	$           4,500,000.00
	Percentage	20%	80%	100%
	Allocation of indirect cost	$                 2,100,000.00	$                   8,400,000.00	$        10,500,000.00
	Percentage	20%	80%	100%
2	Direct cost		$                   3,600,000.00
	Allocated indirect cost		$                   8,400,000.00
	Total cost		$                 12,000,000.00
	Fixed fee (Corporate)	$                     200,000.00
	Fixed fee (Government)		$                   1,800,000.00
	Total Revenue	$                 3,200,000.00	$                 13,800,000.00	$        17,000,000.00

REQUIRED B

		CORPORATE	GOVERNMENT	TOTAL
1	Direct contract hours	3000	6000	9000
	Percentage	33%	67%	100%
	Allocation of indirect cost	$                 3,500,000.00	$                   7,000,000.00	$        10,500,000.00
	Percentage	33%	67%
2	Direct cost		$                   3,600,000.00
	Allocated indirect cost		$                   7,000,000.00
	Total cost		$                 10,600,000.00
	Fixed fee (Corporate)	$ -
	Fixed fee (Government)		$                   1,590,000.00
	Total Revenue	$                 3,200,000.00	$                 12,190,000.00	$        15,390,000

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