1) Support Allocation

IT HR CLOTHING SHOES
IT Hours - 6,000 10,080 7,920 24,000
0% 25% 42% 33%
Employees 184 - 440 176 800
23% 0% 55% 22%

A) Direct Method
$ 5,200 $ 2,800 $ 21,000 $ 15,000
$ 0.29 $ (5,200) $ 2,912 $ 2,288
$ 4.55 $ (2,800) $ 2,000 $ 800
TOTAL $ - $ - $ 25,912 $ 18,088

B) Step-down, IT first
$ 5,200 $ 2,800 $ 21,000 $ 15,000
$ 0.22 $ (5,200) $ 1,300 $ 2,184 $ 1,716
$ 6.66 $ (4,100) $ 2,929 $ 1,171
TOTAL $ - $ - $ 26,113 $ 17,887

C) Step-down, HR first
$ 5,200 $ 2,800 $ 21,000 $ 15,000
$ 3.50 $ 644 $ (2,800) $ 1,540 $ 616
$ 0.32 $ (5,844) $ 3,273 $ 2,571
TOTAL $ - $ - $ 25,813 $ 18,187

D) Reciprocal Method NOT TESTED

IT 5,200 + .23(HR)
HR 2,800 + .25(IT)

IT 5,200 + .23 (2,800 + .25(HR)

5,200 + 644 + .0575HR
.9425IT $ 5,844
IT $ 6,200.53

HR 2,800 + .25(IT)
HR $ 4,350

$ 5,200 $ 2,800 $ 21,000 $ 15,000

$ (6,200) $ 1,550 $ 2,604 $ 2,046
$ 1,000 $ (4,350) $ 2,393 $ 957
TOTAL $ - $ - $ 25,997 $ 18,003

2) Outsource IT?
IT 1,200,000 + .23(HR)
HR 800 + .25(IT)
IT 1,200,000 + .23 (800,000 + .25(IT))
1,200,000 + 184,000 + .0575(IT)
.9425(IT) $ 1,384,000.00
IT $ 1,468,435
1) Direct Method
HR IS CORP CONS
Cost $ 82,700 $ 234,400 $ 998,270 $ 489,860
HR $ (82,700) $ 49,620 $ 33,080
IS $ (234,400) $ 127,855 $ 106,545
TOTAL $ - $ - $ 1,175,745 $ 629,485 $ 1,805,230

2) Step-down Method
HR IS CORP CONS Total
HR Support - 21.00 42.00 28.00 91.00
23.08% 46.15% 30.77%
IS Support 320.00 - 1,920.00 1,600.00 3,840.00
8.33% 50.00% 41.67%
2ND 1ST

HR First when allocating

HR IS CORP CONS
Cost $ 82,700 $ 234,400 $ 998,270 $ 489,860
HR $ (82,700) $ 19,085 $ 38,169 $ 25,446
IS $ (253,485) $ 138,265 $ 115,220
TOTAL $ - $ - $ 1,174,704 $ 630,527 $ 1,805,230
1) Cost Allocation
ENGG IT EAST WEST
A) Direct Method
$ 300,000.00 $ 250,000.00 $ 650,000.00 $ 920,000.00 $ 2,120,000.00
ENGG $ (300,000.00) $ 107,142.86 $ 192,857.14 $ -
IT $ (250,000.00) $ 147,058.82 $ 102,941.18 $ -
TOTAL $ - $ - $ 904,202 $ 1,215,798 $ 2,120,000.00
$ -
B) Step-down Method, ENGG first $ -
$ 300,000.00 $ 250,000.00 $ 650,000.00 $ 920,000.00 $ 2,120,000.00
ENGG $ (300,000.00) $ 90,000.00 $ 75,000.00 $ 135,000.00 $ -
IT $ (340,000.00) $ 200,000.00 $ 140,000.00 $ -
TOTAL $ - $ - $ 925,000 $ 1,195,000 $ 2,120,000.00
$ -
C) Step-down Method, IT first $ -
IT ENGG EAST WEST
$ 250,000.00 $ 300,000.00 $ 650,000.00 $ 920,000.00 $ 2,120,000.00
IT $ (250,000.00) $ 37,500.00 $ 125,000.00 $ 87,500.00 $ -
ENGG $ (337,500.00) $ 120,535.71 $ 216,964.29 $ -
TOTAL $ - $ - $ 895,536 $ 1,224,464 $ 2,120,000.00

D) Reciprocal Method NOT TESTED

2) Evaluation of Results EAST WEST

A) Direct Method $ 904,202 $ 1,215,798
B) Step-down Method, ENGG first $ 925,000 $ 1,195,000
C) Step-down Method, IT first $ 895,536 $ 1,224,464
D) Reciprocal Method $ 916,361 $ 1,203,639
1) Allocating support departments
AS IS GOVT CORP
A) Direct Method
$ 600,000 $ 2,400,000
AS $ (600,000) $ 320,000 $ 280,000
IS $ (2,400,000) $ 800,000 $ 1,600,000
$ - $ - $ 1,120,000 $ 1,880,000

B) Step-down Method (AS first)

$ 600,000 $ 2,400,000
AS $ (600,000) $ 150,000 $ 240,000 $ 210,000
IS $ (2,550,000) $ 850,000 $ 1,700,000
$ - $ - $ 1,090,000 $ 1,910,000

C) Step-down Method (IS first)

$ 600,000 $ 2,400,000
AS $ 240,000 $ (2,400,000) $ 720,000 $ 1,440,000
IS $ (840,000) $ 448,000 $ 392,000
$ - $ - $ 1,168,000 $ 1,832,000

2) Evaluating Methods
GOVT CORP
A) Direct Method $ 1,120,000 $ 1,880,000
B) Step-down Method (AS first) $ 1,090,000 $ 1,910,000
C) Step-down Method (IS first) $ 1,168,000 $ 1,832,000
1) Single Cost Pool
A) Based on Practical Capacity
TC $ 20,000,000
Practical $ 80,000,000
Rate $ 0.25

Dept. Level (KwH) Budget Allocation

Loretta 13,000 $ 20,000 $ 3,250
Bently 21,000 $ 20,000 $ 5,250
Melboum 14,000 $ 20,000 $ 3,500
Eastmoreland 32,000 $ 20,000 $ 8,000
80,000 $ 20,000

B) Based on Expected Usage

TC $ 20,000,000
Expected $ 40,000,000
Rate $ 0.50

Dept. Level (KwH) Budget Allocation

Loretta 10,000 $ 20,000 $ 5,000
Bently 9,000 $ 20,000 $ 4,500
Melboum 10,000 $ 20,000 $ 5,000
Eastmoreland 11,000 $ 20,000 $ 5,500
40,000 $ 20,000

2) Dual-rate method
A) Variable (Based on Expected Usage)
Budgeted VC $ 8,000
Total Exp. Usage 40,000
OH Rate $ 0.20

B) Fixed (Based on Practical Capacity)

Budgeted VC $ 12,000
Total Exp. Usage 80,000
OH Rate $ 0.15

Cost Loretta Bently Melboum Eastmoreland Total

Variable 10,000 9,000 10,000 11,000 40,000
$ 2,000.00 $ 1,800.00 $ 2,000.00 $ 2,200.00 $ 8,000.00
Fixed 13,000 21,000 14,000 32,000 80,000
$ 1,950.00 $ 3,150.00 $ 2,100.00 $ 4,800.00 $ 12,000.00
Total Cost $ 3,950.00 $ 4,950.00 $ 4,100.00 $ 7,000.00 $ 20,000.00

Dept. Level (KwH) OH Rate VC Allocation Level (KwH) OH Rate

Loretta 10,000 $ 0.20 $ 2,000 13,000 $ 0.15
Bently 9,000 $ 0.20 $ 1,800 21,000 $ 0.15
Melboum 10,000 $ 0.20 $ 2,000 14,000 $ 0.15
Eastmoreland 11,000 $ 0.20 $ 2,200 32,000 $ 0.15
40,000 $ 8,000 80,000
FC Allocation Total Cost
$ 1,950 $ 3,950
$ 3,150 $ 4,950
$ 2,100 $ 4,100
$ 4,800 $ 7,000
$ 12,000 $ 20,000
1) Stand-alone Cost Allocation
Indvidual Shared Allocation
Tate $ 26,000 $ 36,000 $ 23,400 $ 2,600
Booth $ 14,000 $ 36,000 $ 12,600 $ 1,400
$ 40,000

2) Incremental Cost Allocation

A) Tate as primary party
Allocation
Tate $ 26,000
Booth $ 10,000
$ 36,000

B) Booth as primary party

Allocation
Booth $ 14,000
Tate $ 22,000
$ 36,000

3) Shapley Value Method

Tate Inc. Booth Inc.
As Primary $ 26,000 As Primary $ 14,000
As Incremental $ 22,000 As Increment $ 10,000
Total $ 48,000 Total $ 24,000
Allocation $ 24,000 Allocation $ 12,000

Summary:
Tate $ 24,000 $ (2,000)
Booth $ 12,000 $ (2,000)
Total $ 36,000
1) Single-rate method
Budgeted FC $ 6,750
Budgeted no. of gifts 6,750
FC / gift $ 1.00
VC $ 0.50
TC / gift $ 1.50

A) Allocate on Budgeted Use (Gifts to be wrapped)

Budget. No.
Department Allocation
of Gifts

Women's Face Wash 2,475 $ 3,712.50

Men's Face Wash 825 $ 1,237.50
Fragrances 1,800 $ 2,700.00
Body Wash 450 $ 675.00
Hair Products 1,200 $ 1,800.00
TOTAL 6,750 $ 10,125.00

B) Allocate on Actual Usage

Actual No. of
Department Allocation
Gifts
Women's Face Wash 2,100 $ 3,150.00
Men's Face Wash 750 $ 1,125.00
Fragrances 1,575 $ 2,362.50
Body Wash 525 $ 787.50
Hair Products 1,050 $ 1,575.00
6,000 $ 9,000.00

C) Based on Practical Capacity, Allocate on Actual Usage

Budgeted FC $ 6,750
Practical Capacity 7,500
FC / gift $ 0.90
VC $ 0.50
TC / gift $ 1.40

Actual No. of
Department Allocation
Gifts
Women's Face Wash 2,100 $ 2,940.00
Men's Face Wash 750 $ 1,050.00
Fragrances 1,575 $ 2,205.00
Body Wash 525 $ 735.00
Hair Products 1,050 $ 1,470.00
6,000 $ 8,400.00

2) Dual-rate method
Budgeted FC $ 6,750
Practical Capacity 7,500
FC / gift $ 0.90

Women's Men's Face Hair

Cost Fragrances Body Wash
Face Wash Wash Products
Variable - Actual 2,100 750 1,575 525 1,050
$ 1,050.00 $ 375.00 $ 787.50 $ 262.50 $ 525.00
Fixed - Budgeted 2,475 825 1,800 450 1,200
$ 2,227.50 $ 742.50 $ 1,620.00 $ 405.00 $ 1,080.00
Total $ 3,277.50 $ 1,117.50 $ 2,407.50 $ 667.50 $ 1,605.00
 6,000
$ 3,000.00
6,750
$ 6,075.00
$ 9,075.00
1) Allocate Revenue
A) Stand-alone Revenue Allocation Method
Individual Shared Allocation
Lodging $ 750 $ 1,000 $ 600
Spa $ 300 $ 1,000 $ 240
Food $ 200 $ 1,000 $ 160
$ 1,250

B) Incremental Revenue Allocation Method

Spa $ 300
Lodging $ 700
Food $ -
$ 1,000

2) Allocate Revenue
Lodging $ 750 Food $ 200
Food $ 50 Lodging $ 600
$ 800 $ 800

A) Shapley Value Method

Lodging
As Primary $ 750
Incremental $ 600
Total $ 1,350
Allocation $ 675

Food
As Primary $ 200
Incremental $ 50
Total $ 250
Allocation $ 125

Summary
Lodging $ 675
Food $ 125
Total $ 800

B) Weighted Shapley Value Method

Lodging Weight
As Primary $ 750 $ 2,250.00
Incremental $ 600 $ 600.00
Total $ 2,850.00
Allocation $ 712.50

Food Weight
As Primary $ 200 $ 200.00
Incremental $ 50 $ 150.00
Total $ 350.00
Allocation $ 87.50

Summary
Lodging $ 712.50
Food $ 87.50
Total $ 800.00
1) Step-down Method
Bldg. Personnel Plant Adm. Caf. OL Storeroom Machining
$ 10,000 $ 1,000 $ 26,090 $ 1,640 $ 2,670 $ 34,700
1. Bldg. $ (10,000) $ 200 $ 700 $ 400 $ 700 $ 3,000
$ 0.10
2. Personnel $ - $ 1,200
$ 6.00 $ (1,200) $ 210 $ 60 $ 30 $ 300
3. Plant Adm. $ - $ 27,000
1 $ (27,000) $ 1,000 $ 1,000 $ 8,000
4. Caf. OL $ - $ 3,100
20 $ (3,100) $ 100 $ 1,000
5. Storeroom $ - $ 4,500
1.5 $ (4,500) $ 3,000
6. Operating Depts. $ - $ 50,000
Labor Hours 5,000
OH / Labor Hour $ 10

2) Direct Method
Bldg. Personnel Plant Adm. Caf. OL Storeroom Machining
$ 10,000 $ 1,000 $ 26,090 $ 1,640 $ 2,670 $ 34,700.00
1. Bldg.
$ (10,000) $ 3,750.00
2. Personnel
$ (1,000) $ 333.33
3. Plant Adm.
$ (26,090) $ 8,348.80
4. Caf. OL
$ (1,640) $ 546.67
5. Storeroom
$ (2,670) $ 1,780.00
6. Operating Depts. $ 49,458.80
Labor Hours $ 5,000.00
OH / Labor Hour $ 9.89

3) Cost of Job
A) Step-down Method
JOB 88
Machining $ 10.00 $ 18 $ 180
Assembly $ 5.00 $ 2 $ 10 $ 190.00
JOB 89
Machining $ 10.00 $ 3 $ 30
Assembly $ 5.00 $ 17 $ 85 $ 115.00
TOTAL $ 305.00

B) Direct Method
JOB 88
Machining $ 9.89 $ 18 $ 178
Assembly $ 5.04 $ 2 $ 10 $ 188.12
JOB 89
Machining $ 9.89 $ 3 $ 30
Assembly $ 5.04 $ 17 $ 86 $ 115.29
TOTAL $ 303.41
 Assembly
$ 48,900 $ 125,000
$ 5,000 $ -

$ 600 $ -

$ 17,000 $ -

$ 2,000 $ -

$ 1,500 $ -
$ 75,000
15,000
$ 5

Assembly
$ 48,900.00 $ 125,000.00

$ 6,250.00 $ -

$ 666.67 $ -

$ 17,741.20 $ -

$ 1,093.33 $ -

$ 890.00 $ -
$ 75,541.20
$ 15,000.00
$ 5.04
 Practical Monthly
Dept Capacity Usage
(KwH) (KwH)
Loretta 11,000 9,000
Bently 22,000 10,000
Melboum 13,000 8,000
Eastmoreland 14,000 3,000
Total 60,000 30,000

1) Single Cost Pool

Practical Monthly
Cost $ 14,400 $ 14,400
Total $ 60,000 $ 30,000
TC per KwH $ 0.24 $ 0.48

Dept. Practical Allocation

Loretta 11,000 $ 2,640
Bently 22,000 $ 5,280
Melboum 13,000 $ 3,120
Eastmoreland 14,000 $ 3,360
Total 60,000 $ 14,400

Dept. Monthly Allocation

Loretta 9,000 $ 4,320
Bently 10,000 $ 4,800
Melboum 8,000 $ 3,840
Eastmoreland 3,000 $ 1,440
Total 30,000 $ 14,400

2) Dual Rate Method

Practical Monthly
Cost $ 11,400 $ 3,000
Total $ 60,000 $ 30,000
TC per KwH $ 0.19 $ 0.10

Dept. Monthly Allocation Practical Allocation

Loretta 9,000 $ 900 11,000 $ 2,090 $ 2,990
Bently 10,000 $ 1,000 22,000 $ 4,180 $ 5,180
Melboum 8,000 $ 800 13,000 $ 2,470 $ 3,270
Eastmoreland 3,000 $ 300 14,000 $ 2,660 $ 2,960
Total 30,000 $ 3,000 60,000 $ 11,400 $ 14,400
 Support Divisions Operating Divisions
TOTAL
HR IS Corporate Consumer
Budgeted costs $ 72,000 $ 232,000 $ 993,000 $ 486,000 $ 1,783,000
HR Support 0% 26.3157895% 44.2105263% 29.4736842% 100.0000000%
Number of employees - 25 42 28 $ 95
IS Support 8% 0% 50% 42% 100%
54.4303797% 45.5696203%
Processing time (minute 350 - 2,150 1,800 $ 4,300

1) Direct Method
HR IS CORP CONS
Cost $ 72,000 $ 232,000 $ 993,000 $ 486,000 1,783,000
HR $ (72,000) $ 43,200 $ 28,800 -
IS $ (232,000) $ 126,278 $ 105,722 -
TOTAL $ - $ - $ 1,162,478 $ 620,522 1,783,000
-
-
2) Step-down Method, HR First -
HR IS CORP CONS -
Cost $ 72,000 $ 232,000 $ 993,000 $ 486,000 1,783,000
HR $ (72,000) $ 18,947 $ 31,832 $ 21,221 -
IS $ (250,947) $ 136,592 $ 114,356 -
TOTAL $ - $ - $ 1,161,423 $ 621,577 1,783,000
-
-
HR IS CORP CONS -
0.0000000% 26.3157895% 44.2105263% 29.4736842% 100.0000000%
Cost $ 72,000 $ 232,000 $ 993,000 $ 486,000 1,783,000
HR $ (72,000) $ 18,947 $ 31,832 $ 21,221 -
IS $ (250,947) $ 136,592 $ 114,356 -
TOTAL $ - $ - $ 1,161,423 $ 621,577 1,783,000
-
-
3) Alternative -
HR IS -
Budgeted costs $ 72,000 $ 232,000 304,000
Percentage 0% 26.3157895% 0
$ - $ 18,947 $ 18,947 37,895
Percentage 8.1395349% 0% 0
$ 18,884 $ - $ 18,884 37,767
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1) Stand-Alone Method
Individual Shared Allocation
Tesh $ 55,000 $ 95,000 $ 52,250
Better $ 45,000 $ 95,000 $ 42,750
$ 100,000

2) Incremental Method
A) Tesh is primary party
Primary $ 55,000
Individual $ 40,000
Total $ 95,000

B) Better is primary party

Primary $ 45,000
Individual $ 50,000
Total $ 95,000

3) Shapley Value Method

Tesh
Primary $ 55,000
Incremental $ 50,000
Total $ 105,000
Allocation $ 52,500

Better
Primary $ 45,000
Incremental $ 40,000
Total $ 85,000
Allocation $ 42,500

Summary
Tesh $ 52,500
Better $ 42,500