Refer to data. Suppose that Government regulations require T3 Technologies to use the step-down method to allocate the costs of support departments and activities to line departments. However, these regulations do not dictate the order in which to allocate the cost of support activities. The Government would then reimburse T3 Technologies at 115% of allowable cost, assuming 1,500 billable hours per person. The corporate clients, of course, do not care about T3 Technology€™s cost. They would simply refuse to hire T3 Technology€™s services if it charged more than the market rate of $100 per billable hour.

Required:
Advise T3 Technology€™s management on how it could refine its allocation procedures to maximize its reportedprofit.

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IS AS Government Coporate $500,000 $300,000 $2,400,000 $3,240,000 Traced costs Service consumption patternServices consumed by Services provided by AS (Persons 5 IS AS Government Corporate IS (hours) 4,000 hours 2,000 hours 4,000 hours 20 25