10000 10000 total 25000 54425 73575 47

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Unformatted text preview: $125,000 40,000 10,000 $175,000 $11.20 (2) Notes: (1) Hours of service applies to customers only, not administration. (2) Cost per hour figures do not sum to $11.20 since the $175,000 includes the cost of administration (for which there is no hourly cost of service) •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• Note that the total cost per hour remains the same in both situations. This must be the case, since total costs ($175,000) and total hours (15,625) are unchanged. What value, then, derives from the extra effort associated with separating the company into three cost centers? There are two related answers to this question: an accounting-oriented one and a management-oriented one. From an accounting perspective, costs are better understood and more easily computed if they...
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This document was uploaded on 03/30/2014.

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