Question

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. Required A Required B 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 (ie., 2.34 million should be entered as 2,340,000).)

Answer 1

Answer

a) Allocation on indirect cost based on direct cost:

	Corporate	Government	Total
Direct costs	$7,20,000	$28,80,000	$36,00,000
Percentage	20%	80%	100%
	($7,20,000/$36,00,000)*100	($28,80,000/$36,00,000)*100
Allocation of Indirect Costs	$15,60,000	$62,40,000	$78,00,000
	(20%*$78,00,000)	(80%*$78,00,000)
Total Cost	$22,80,000	$91,20,000	$114,00,000
Profit		$13,68,000
Total revenue	$23,00,000	$104,88,000	$127,88,000

Total Expected Revenue

$127,88,000

b) Allocation on indirect cost based on direct contract hours worked:

	Corporate	Government	Total
Direct costs	$7,20,000	$28,80,000	$36,00,000
Direct contract labour hours	2,100	4,200	6,300
Allocation of Indirect Costs	$26,00,000	$52,00,000	$78,00,000
	{(2100/6300)*$78,00,000)}	{(4200/6300)*$78,00,000)}
Total Cost	$33,20,000	$80,80,000	$114,00,000
Profit		$12,12,000
Total revenue	$23,00,000	$92,92,000	$115,92,000
Total Expected Revenue	$115,92,000