Liberty Credit Checks produces two styles of credit reports: personal and corporate. The difference between the two is the amount of background information and data collection required. The corporate report uses more skilled personnel because additional checking and data are required. Total support service costs to be allocated are $3,200,000. The relevant figures for the year just completed follow:
$$\begin{array} { l r c }
\text { Allocation base } & \text { Individual } & \text { Corporate } \
\text { Data purchased } & \$ 40,000 & \$ 80,000 \
\text { Research hours } & 24,000 & 30,000 \
\text { Interview hours } & 1,000 & 10,000 \
\text { Number of reports } & 16,000 & 3,000
\end{array}$$
Required:
(a) Which allocation base would be preferred by each manager? Which allocation base would be least preferred?
(b) Provide arguments that each manager would make for his/her preferred allocation base. How would each manager argue against his/her least preferred allocation base?

Question

Liberty Credit Checks produces two styles of credit reports: personal and corporate. The difference between the two is the amount of background information and data collection required. The corporate report uses more skilled personnel because additional checking and data are required. Total support service costs to be allocated are $3,200,000. The relevant figures for the year just completed follow:
 $$\begin{array} { l r c } 
\text { Allocation base } & \text { Individual } & \text { Corporate } \
\text { Data purchased } & \$ 40,000 & \$ 80,000 \
\text { Research hours } & 24,000 & 30,000 \
\text { Interview hours } & 1,000 & 10,000 \
\text { Number of reports } & 16,000 & 3,000
\end{array}$$ 
Required:
(a) Which allocation base would be preferred by each manager? Which allocation base would be least preferred?
(b) Provide arguments that each manager would make for his/her preferred allocation base. How would each manager argue against his/her least preferred allocation base?

Quizplus · Accepted Answer

The Answer of Liberty Credit Checks produces two styles of credit reports: personal and corporate. The difference between the two is the amount of background information and data collection required. The corporate report uses more skilled personnel because additional checking and data are required. Total support service costs to be allocated are $3,200,000. The relevant figures for the year just completed follow:
 $$\begin{array} { l r c } 
\text { Allocation base } & \text { Individual } & \text { Corporate } \
\text { Data purchased } & \$ 40,000 & \$ 80,000 \
\text { Research hours } & 24,000 & 30,000 \
\text { Interview hours } & 1,000 & 10,000 \
\text { Number of reports } & 16,000 & 3,000
\end{array}$$ 
Required:
(a) Which allocation base would be preferred by each manager? Which allocation base would be least preferred?
(b) Provide arguments that each manager would make for his/her preferred allocation base. How would each manager argue against his/her least preferred allocation base?

Liberty Credit Checks Produces Two Styles of Credit Reports: Personal