Question

Advanced Computer Solutions, Inc. has two main services: (1) time on a timeshared computer system, and (2) proprietary computer programs. Computer time is provided by the operation department (Op) and programs are written by the programming department (P). The percentage of each service used by each department for a typical period is: Supplied User Op P Op --- 40 % P 30 % --- Sold to customers 70 % 60 % In a typical period, the operation department (Op) spends $4,500 and the programming department (P) spends $2,500. Under the reciprocal method what is the algebraic solution to the cost allocation problem? Op = 4,500 + .40 P; P = 2,500 + .30 Op. Op = 4,500 + .70 P; P = 2,500 + .60 Op. Op = 2,500 + .40 P; P = 4,500 + .30 Op. Op = 2,500 + .70 P; P = 4,500 + .60 Op.

Answer 1

Op = 4,500 + .40 P; P = 2,500 + .30 Op.

OP's cost is $4500 plus 40% cost allocation from department P and

P's cost is $2500 plus 30% cost allocation from department OP.