THE ALTERNATIVE TO OVERHEAD ALLOCATION (CASE STUDY#4)

TOPIC: THE ALTERNATIVE TO OVERHEAD ALLOCATION (CASE STUDY#4)

THE ALTERNATIVE TO OVERHEAD ALLOCATION

Revised Table

 

Total

New York

Chicago

Paris

Little Rock

Billings (Revenue)

50,000

22,000

10,000

16,000

2,000

Traceable Consulting Costs

33,500

14,000

6,000

12,500

1,000

Gross Profit on Sales

6,500

3,600

2,000

300

600

Traceable Other Costs

1,000

300

200

500

0

Net Income

3,000

2,200

1,300

-1

500

Difference

Non-traceable fixed costs are incurred on behalf of your business as a whole and can't be assigned to a specific product line. The difference in the above table and the below table is the absence of non-traceable cost. Each office is allocated a portion of the non-traceable fixed costs of the organization that are common to all offices. Â It is the policy of the company that this allocation is based ...