Melloitte is a multinational company that provides two main professional services: auditing and consulting. Meollitte has received a request from Elanat (an advertising company) in Qatar to help the company allocate costs between its two main sectors: consumer and commercial. Assuming your group works for Meloitte, discuss what can be done to solve the cost allocation problem. Elanat shared some financial information from the company's June 2022 income statement with your group:

Sales (Consumer) $960,000

Sales (commercial) 740,000

Variable costs (consumer) 620,000

Variable costs (commercial) 520,000

Traceable Fixed Costs (Consumer) 125,000

Traceable Fixed Costs (Commercial) 135,000

The common fixed costs were as follows:

Shared fixed costs (consumer) $80,000

Common fixed costs (commercial) 100,000

You are required to specify/calculate the following: (Use Excel for requirements 2, 3 and 4 and add a copy to the Word report)

1- The problem of cost allocation carried out by the company (0.50 score)

2- Margin of contribution for the consumer and commercial sectors (1 degree)

3- The sectoral margin for the consumer and commercial sectors (1 degree)

4- The company's net operating income (1 degree)

5- Based on your computational results, what are the areas that should draw Elanat's attention? (0.50 degrees)

Answer rating: 100% (QA)

Question 1 A Current cost allocation suffers from the proble... View the full answer