Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 34

The municipal water and desalinization utility in a California city currently allocates some costs for maintenance shop workers to pumping stations based on the number of pumps at each station. At the last director's semiannual meeting, a suggestion was made to change the allocation basis to the number of trips that pump service personnel make to each station, because some stations have old pumps that require more maintenance. Information about the stations is below. The indirect cost budget is $20,000 per pump.
a)Allocate the budget to each station based on the number of service trips.
b)Determine the old allocation on the basis of the number of pumps, and comment on any significant differences in the amounts allocated to the stations.