Management_Accounting_Case_1-Fall_2007

Management_Accounting_Case_1-Fall_2007 - M ANAGEMENT 122 F...

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Unformatted text preview: M ANAGEMENT 122 F ALL 2007 M ANAGEMENT A CCOUNTING D ANNY S. L ITT CASE ASSIGNMENT 1 Environmental Engineering, Inc., designs and monitors environmental reports for several clients. Assume the company has three service departments: Biology (S1), Building Occupancy (S2) and Project Supervision (S3). Costs are recorded in these departments and are allocated to two project departments and one marketing department: Environmental Production (P1), Environmental Monitoring (P2) and the Marketing Department (P3). All six departments share the same building. The company allocates cost to Environmental Production and Environmental Monitoring for two purposes: (1) to determine the cost to produce and market it’s services and (2) to encourage department managers to monitor each other’s costs; that is, cross-departmental monitoring. Each service department is an intermediate cost center whose costs are recorded as incurred and then distributed to other cost centers. At the company, Biology (S1) costs are distributed on the basis of biology staff time to other cost centers....
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