Estimated	Allocation	Estimated Quantity
Activity	Cost	Base	of Cost Driver		Cost Allocation Rate
Documentation preparation	$115,000	Pages	3,450	pages	$33.33	per page
Information technology support	170,000	Applications used	815	applications	$208.59	per application
Training	466,000	Direct labour hours	6,000	hours	$77.67	per hour
Total indirect costs	$751,000

Cost Driver	Clancy	Bickford
Direct labour hours	105	105
Pages	60	315
Applications used	3	85

1.Compute the cost assigned to the Clancy engagement and to the Bickford engagement using the ABC system.

2.Compute the operating income from the Clancy engagement and from the Bickford engagement using the ABC system.

Requirement 1. Compute the cost assigned to the Clancy engagement and to the Bickford engagement using the ABC system. (Round your answers to the nearest whole dollar.)

	Clancy	Bickford
Direct labour
Indirect costs:
Documentation preparation
Information technology support
Training
Total costs

Requirement 2. Compute the operating income from the Clancy engagement and from the Bickford engagement using the ABC system. (Round your answers to the nearest whole dollar. Enter operating losses with parentheses or a minus sign.)

		Clancy	Bickford
Less:
Operating income (loss)

Geller Inc. is a technology consulting firm focused on website development and integration of internet business applications. President Arabella Weber's ear is ringing after an unpleasant call from client John .Clancywas irate after opening his bill forGeller's redesign of his company's website.Clancy said that Geller's major competitor,Delta Applications, charged much lower fees to another company for which Clancy serves on the board of directors. Weber is puzzled for two reasons. First, she is confident that her firm knows website design and support as well as any of Geller's competitors. Weber cannot understand how

Delta ApplicationsDelta Applications can undercut Geller's rates and still make a profit. But Delta ApplicationsDelta Applications

is reputed to be very profitable. Second, just yesterday Weber received a call from client Robert Bickford.Bickford was happy with the excellent service and reasonable fees Weber charged him for adding a database-driven job-posting feature to his company's website. Weber was surprised by Bickford's compliments because this was an unusual job for Geller that required development of complex database management and control applications, and she had felt a little uneasy accepting it. like most consulting firms,

Geller traces direct labour to individual engagements (jobs).Geller allocated indirect costs to engagements using a budgeted rate based on direct labour hours. Weber is happy with this system, which she has used since she established Geller in 1997.

Weber expects to incur $751,000 of indirect costs this year, and she expects her firm to work 6,000 direct labour hours. Weber

and the other systems consultants earn $380 per hour. Clients are billed at 180% of direct labour cost. Last month, Geller's

consultants spent 105 hours on Clancy's engagement. They also spent 105 hours on Bickford's engagement.