Problem:
Return to the direct method of cost allocation and use the same cost drivers as specified in Problem 6.4 for the general administration and facilities departments. However, assume that $2,000,000 of financial services costs are related to billing and managerial reporting and $1,000,000 are related to payroll and personnel management activities.
Required:
Question 1: Devise and implement a cost-allocation scheme that recognizes that the financial services department has two widely different functions.
Question 2: Is there any additional information that would be useful in compiling Part A?
Question 3: What are the costs and benefits to St. Benedict's of creating two cost pools for the allocation of financial services costs?
Note: Provide support for your rationale.