Bancroft, Fellouris, and Tanner, Inc

Essay

Bancroft, Fellouris, and Tanner, Inc. is a large multinational consulting company. The company has eight divisions and five service departments: Facilities, Printing, Library, Human Resources, and Accounting/ Finance. The facilities department handles all building maintenance, cost of heat, water, insurance and other facility-related costs. The company has three types of space: office space, computer space which is the most expensive due to special conditioning required at all times and warehouse space for its manufacturing division. The print shop prints all proposals, job bids, special advertising materials, accounting and finance documents and any materials requested by the divisions. The library, staffed by two full time librarians, maintains research materials and personal computers, purchases periodicals and books requested by the consulting divisions. Human resources handles all job applications, on-the-job training and payroll for both corporate and division employees, while accounting and finance performs corporate budgeting, allocations, billing for all divisions, maintains travel and petty cash desks for the extensive travel performed by the consulting divisions. Cost allocations and budgets, which are used to determine overhead rates for the divisions, are very important due to the high percentage of government contracts.
Required:
(a) The company wishes to use a step-method of allocation. Suggest how you would go about determining which service department should be the first step and which should be the last. What considerations would go into your decision?
(b) Suggest appropriate cost allocation bases for the five service departments. (Based on an actual publicly held company)