Question

s will mpetilive (within 2 percent on a direck-cost bosis swilch to contract cleaners. Although BSD is sill not competitive o full aPlments to such an eatent that mos cost it is olmosl ibe the cost occounting ond control issues in this situotion, which are driving Ms. Etemad, Ms. Corrado, and M. laurri Evemad is confident thot her cosbcutting progrom wil succeed by the torget date, s its current accounits. Should she discount BSD's services in order to koep current if BSD keeps Me. laurnii kould Jone Corrado insist thal managers of the operoling units continue 1o use BSD's services? What are the pros and cons of this approacha AP 8.4 Cost Allocation of Tuition Benefits in Universities LO 3,4, 5 Foshern Universilty, located in central Canoda, prides itself on providing facultyod saff with titive compensation package. One aspact of this pockoge is o uilion benelit of $4,000 o compe car child per year, for up to four years, to offset the cost of collage education. The foculy or of member's child con atend any Canadion university, including Eastern University, ond receive the tuition benefit, If o staff member hos three children in universily one year, then the ataf member receives o $12,000 tuition benehit. This money is not taxed to the individual staff or foculty member Eastern Universily pays the beneit directly to the other university where the faculty/soff member's child is enrolled for reduces the amount of tuition owed by the foculity/stoff, if the student is attending Eastern Universityl and then charges this payment to a benafits account. This benefits account is then allocated back to the various foculties and departments based on total salaries in the faculty or department. ly evaluate the pros and cons of Eastern University's present method to account for huition benefits. What changes would you recommend

Answer 1

These benefits are not being taxed in the hands of employees.

Eastern University should charge it to employee benefits expense account by crediting a liability account. When the payment is made to other universities this liability account will reduce by subsequently reducing bank account.

Where child is enrolled in Eastern University itself, the employee benefit expenses accoount needs to be debited and other related department expense account should be reduced.