Answer 1. Lackawanna Community college case:
Part I. Cost allocation to departments based on allocation base given:
Division |
Budgeted enrollment |
Budgeted credit hours |
Planned courses requiring Computer work |
Liberal Arts |
2,000 |
40,000 |
22 |
Sciences |
1,300 |
35,500 |
34 |
Business Administration |
1,200 |
29,500 |
33 |
Total |
4,500 |
105,000 |
89 |
Division |
||||
Department and allocation base |
Liberal Arts |
Sciences |
Business Administration |
Total cost allocated |
Admissions (enrollment) |
$56,444 |
$36,689 |
$33,867 |
$127,000 |
Registrar (credit hours) |
$81,905 |
$72,690 |
$60,405 |
$215,000 |
Computer Services (courses requiring computer) |
$112,719 |
$174,202 |
$169,079 |
$456,000 |
Working notes:
1. The allocation base for admissions cost is enrollment and total admissions cost to be allocated among the three departments is $127,000. Looking at enrollment, each department’s budgeted enrollment is given, totaling up to 4,500.
So, cost allocation = Total department cost * (Allocation base of the department/Total allocation base)
Admissions cost allocation to Liberal arts = $127,000 * (2,000/4,500) = $56,444 (rounded off)
Admissions cost allocation to Sciences = $127,000 * (1,300/4,500) = $33,867 (rounded off)
Admissions cost allocation to Business administration = $127,000 * (1,200/4,500) = $33,867 (rounded off)
2. The allocation base for Registrar cost is given as credit hours. Total credit hours from the first table above = 105,000 hours
Registrar cost allocation to Liberal arts = $215,000 * (40,000/105,000) = $81,905 (rounded off)
Registrar cost allocation to Sciences = $215,000 * (35,500/105,000) = $72,690 (rounded off)
Registrar cost allocation to Business administration = $215,000 * (29,500/105,000) = $60,405 (rounded off)
3. The allocation base for computer services is given as courses requiring computer. The total of this allocation base as per first table above = 89
Computer services cost allocation to Liberal arts = $456,000 * (22/89) = $112,719 (rounded off)
Computer services cost allocation to Sciences = $456,000 *(34/89) = $174,202 (rounded off)
Computer services cost allocation to Business administration = $456,000 *(33/89) = $169,079 (rounded off)
Part II.
Out of the allocation base options provided, the better allocation base for Registrar office cost can be budgeted enrollments because Registrar office work is directly proportion to number of students as it requires maintaining students’ records, making appointments, scheduling classes,etc. It would be better than existing allocation base which is credit hours.
For computer services cost, the better allocation base would be credit hours requiring computer work, since cost depends on time spent in the Computer lab.
Note: As HOMEWORKLIB answering guidelines, in case of multiple questions, first question to be answered completely. Request you to post Question 2 in a separate question.
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