959 a an equal assessment implicitly assumes that

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9.59a.An equal assessment implicitly assumes that each household derives equal benefit from the improvement. The use of linear feet of road front ties the cost to the work done. The idea here is that the cost is proportional to the linear feet of pipe laid and that homeowners “own” the pipe that runs through their property. The use of property value isbased on the assumed “ability to pay.” The notion is that persons owning more expensive homes have greater ability to pay for the upgrade and should be charged accordingly. All of the metrics are somewhat arbitrary. All of them are easy to implement and have some reasonable justification. Ultimately, cities make the choice based on political considerations, with ability to pay often being the dominant criterion.b. It is more common to assess sidewalks based on linear feet of road front. Unlike sewer lines, it is possible to partition sidewalks into discrete pieces that belong to the homeowner. Indeed, in many cities, the homeowner is responsible for maintaining the sidewalk (e.g., shoveling snow). The key distinction between sewer lines and sidewalks appears to be in the ability to trace the cost to the individual homeowner. As sidewalks can be installed in pieces, there is ample justification to attach the cost of the sidewalk fora given home to that home. In contrast, sewer lines are a “public good” and the entire system needs to be completed before benefits are realized.9.60Payroll Processing. There appear to be two types of costs in this category. The first relates to payroll processing and the second relates to employee hiring and firing. Both expenses are part of operating the business and therefore should be allocated to individualbranches for the purpose of evaluating branch profitability. The answer is less clear for managerial performance evaluation. The cost of payroll processing is not controllable by the manager except via his or her influence on the payroll. Thus, the allocation makes sense if Maggie wants the managers to pay attention to payroll costs. However, there are likely more direct mechanisms, such as boundary controls that specify wages and staffing strength, for controlling payroll expense. In a likefashion, we can argue for allocating some payroll costs based on the number of new employee hires. While more direct controls are also available (e.g., Maggie speaking withthe branch to reduce turnover), this allocation sensitizes the branch managers to the cost of turnover.Balakrishnan, Sivaramakrishnan, & Sprinkle – 2eFOR INSTRUCTOR USE ONLY9-32
Advertising. The cost of corporate advertising can be allocated to branches using sales $ as the basis. The problem text indicates a direct sales effect. Because sales are recorded atthe branch level, it seems reasonable to allocate the associated costs as well for evaluating branch performance.

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