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 | $ | 660,000 | $ | 2,640,000 | $ | 3,300,000 | |||
Direct contract hours worked | 1,800 | 3,600 | 5,400 | ||||||
The controller expects indirect costs to total $6.9 million next year. Revenues from Corporate clients are expected to be $2.0 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?
Corporate | Government | Total | ||
Direct costs | 660,000 | 2,640,000 | 3,300,000 | |
Direct contract hours worked | 1,800 | 3,600 | 5,400 | |
a | Total indirect Cost | $6,900,000 | ||
Total direct cost | $3,300,000 | |||
Allocation rate | 2.0909 | |||
1 | Cost allocated to two units | Corporate | Government | Total |
Direct costs | 660,000 | 2,640,000 | 3,300,000 | |
Indirect Costs | $1,380,000 | $5,520,000 | $6,900,000 | |
(2.0909*660,000) | (2.0909*2,640,000) | |||
2,040,000 | 8,160,000 | 10,200,000 | ||
Profit | $1,224,000 | |||
2 | Total revenue | $2,000,000 | $9,384,000 | $11,384,000 |
b | Total indirect Cost | $6,900,000 | ||
Total direct contract hours | 5400 | |||
Allocation rate | $1,277.78 | |||
1 | Cost allocated to two units | Corporate | Government | Total |
Direct costs | 660,000 | 2,640,000 | 3,300,000 | |
Indirect Costs | $2,300,000 | $4,600,000 | $6,900,000 | |
(1277.78*1800) | (1277.78*3600) | |||
2,960,000 | 7,240,000 | 10,200,000 | ||
Profit | $1,086,000 | |||
2 | Total revenue | $2,000,000 | $8,326,000 | $10,326,000 |
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Greenfield Consultants conducts analyses of public policy issues. The company has two units: Government (with various...
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 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. Direct costs...
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....
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 Direct...
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...
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. Direct...
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. Direct...
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 Direct...
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....
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. Direct...
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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...