Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 24

All the indirect costs are allocated by accounting for a department. The manager has obtained records of allocation rates and actual charges for the prior 3 months and estimates for this month (May) and next month (see the table). The basis of allocation is not indicated, and the company accountant has no record of the basis used. However, the accountant advises the manager to not be concerned because the allocation rates have decreased each month. During the evaluation, the following additional information from departmental and accounting records is obtained.
a)With this information determine the allocation basis used each month.
(b) Comment on the accountant's statement about decreasing allocation rates.