Data Master Is a Computer Software Consulting Company

question 68

Essay

Data Master is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Cynthia Moore, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Moore is considering three different methods of allocating overhead costs: the direct method, the step method, and the reciprocal method. Moore assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department.
Information systems are allocated on the basis of hours of computer usage; facilities are allocated on the basis of floor space.
Required:
Allocate the service department costs to the user departments using the direct method. (Round to the nearest whole dollar and provide total user department costs.)

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Definitions:

Budget Process

A planning process that involves the creation of a financial plan or budget to project future revenues and expenses, guiding an organization's financial decisions.