The Barton Creek Company Has Three Client-Contact Departments: Market Research

question 19

Essay

The Barton Creek Company has three client-contact departments: Market Research, Branding, and Promotion. Each department requires the services of the Legal Department for the contracts that each undertakes. The size of the Legal Department was based on long-run estimates of contracts. Information on the Legal Department's budgeted and actual costs is as follows:
The budget for the Legal Department is $400,000 + $15/contract. The budgeted volume of contracts is as follows:
$$\begin{array} { | l | r| } \hline \text { Market Research } & 200 \\\hline \text { Branding } & 400 \\\hline \text { Promotion } & 800 \\\hline\end{array}$$
The actual number of contracts for Market Research was 207, for Branding was 512, and for Promotion was 820.
Required:
(Use four decimal places in your calculations.)
a. If a single charging rate based on budgeted usage is used, how much of the cost of the Legal Department would be allocated to each of the producing departments?
b. If a dual charging rate is used, how much of the cost of the Legal Department would be allocated to each of the producing departments?

---

Definitions:

Moral Obligation

A duty which one owes, and which he ought to perform, but which he is not legally bound to fulfil.

Basic Necessities

Goods or services considered essential for maintaining a minimum standard of living, such as food, water, shelter, and healthcare.

Utilitarian Justice

A principle that advocates for actions that promote the greatest happiness or utility for the greatest number of people.

Decreasing Marginal Utility

The economic principle stating that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.