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Grants overhead costs consist of a.) computer support, $200,000 and b.) legal support, $250,000. Projected information on the two services is:

Tax

OH costs

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c. Why are the costs allocated to each of the two service lines different? Is it better to use activity based costing (ABC) than a single OH rate based on DL costs? Why?

d. As a manager, do you think that it is helpful to know what the activity rates (costs) are for each support area? If you were the manager responsible for the Audit service line, would you take any action regarding the amount of support costs used by your area? Be specific about what cost(s) you would address.

 

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