Question

Greenfield Consultants conducts analyses of public policy issues. The company has two units: Government (with various US government agencies as the only clients and Corporate with several corporations os clients). Government business is charged based on the total costs (direct and indirect) plus a 15 percent fee profit Corporate clients are charged a forced 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 Direct costs Direct contract hours worked Corporate Government Total $ 56e,eee $2,242,eee $2,800, 1,380 2,50 3,988 The controller expects indirect costs to total $5.4 million next year. Revenues from Corporate clients are expected to be $1.5 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? Complete this question by entering your answers in the tabs below. Red 1. What cost would be allocated to the two units (Corporate and Government? 2. What total revenue would they expect to collect next year? Enter your answers in dollars and not in millions (., 2.34 milion should be entered as 2.340,000).) Corporate Government Total Directos Partage location of Partage cost 2 Directos Alcinot Required. A Required >

Answer 1

Pageno Answers a) Horking : 1. Allocate indiouct cost based on direct cost Particulars corporate Goverment. Total Discect cost_ $560.000 $2,240,000 $2,800,000 Allocation of Indiore 5400000 15400000), ct cost 2800000 /ssod 2800000 400 = 1080000 = 4320000 $5400000 39 1640000 6560000 $8200000 2) Total Revenue expected : Disust costs And Cost all Total Coats Revenue Corporate Government Total 560.000 | 2240.000 2800 000 1080000 | 43200000 5400000 16400000 656000018200000 16400000 Llegatiated amt 6560000 X his Profit Crevencel-cost 7544000 23944000 o 984000 15149000

pg © b) 1, Allocate indirect cost baked on direct contact hrs worked 2.600 13.900 Direct Contract has worked 4. 300 Allocation of Indirect COS 5400000 x 1200 3900 1800000 5400000 3600000 5400000 2900 - X 2600 2. Total revenue Expected corporate Government Toy Prorect costs Ind cost all 56000 0 | 2240000 2800000 1800 000 3600 000 5400000 236000 0 5840000 8200000 I Total cost Revenue Negoited amt 58400000 X 1:15 16400000 Profit Revenue-cost) 16716000009430000 14040000 6654600001230000 Government Total An&wers for a 76. Req a Corporate ! Direct cost 560000 Percentage 204. 2240000 12800000 80% 100%, Allocation of indiorect! 1640000 | 6560000 | 820000 cost Percentage 204. 1 80% 100%

Pagenda Corporate Government. Total Direct.cost 560,000 | 2240000 2800000 Allocated indixectcost 1080000143200000 5400000 Tatal cost 116400000 | 6860000 8200000 Pixed feecol 16400000 | 16400000 fixed Fee (Gou) 7 Suuooo +S44000 19840000 Total Revenue! (6400000 23944000 Reg bo Corporate Government Jotal Direct costtract | 11300 / 2600 / 3900 | Percentage 1 33.334 66-674. I 100%, Allocation of Indirect co 1800000 360000045 5400.000 Percentage I 33% 6+y.. 004, Direct cont 560,000 2,000,000 2,800,000 Allocated Indiased cost 1800000 360000 0-2 5400000 Total cost 23600000 584000C-2 8.200.000 Fixed fee Coop) 16400000 16400000 Eixed fee Cow 671600000-8 671600000 |_Tofal Bewenwel 16400000 1671. CO DE 688000000