Finnegan's Garden

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  • Topic: Allocation
  • Pages : 2 (494 words )
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  • Published : May 14, 2013
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Finnegan’s Gardens
The shared costs of each service line can be allocated in several different ways. You can allocate based on FTE’s, direct-labor costs, direct labor plus direct materials or by square footage usage. If you were to allocate the shared costs for Finnegan’s Gardens by FTE you would allocate $24,778 to design, $89,203 to installation, $56,991 to maintenance and $24,778 to administration. To calculate the allocation based on FTE’s, I divided the FTE number given for each service line and divided it by the total number of FTE’s. I then multiplied the result by the total shared costs of $195,750. If you chose to allocate based on direct labor, you would allocate $43,843 to design, $119,360 to installation and $76,390 to maintenance. To allocate the costs based on direct labor, I calculated the direct labor rate per hour for each service line. I divided this number by the total direct labor hours and multiplied that result by the total of the shared costs. If you add in the direct materials to the direct labor, you would allocate $42,231 to design, $94,736 to installation and $58,782 to maintenance. I used the same method to allocate the direct labor plus direct materials as I used to allocate the costs based on direct labor. The last method I used for allocating the shared costs was based on the square footage. To allocate the shared costs based on square footage, you would allocate $$113,661 to design, $20,522 to installation, $20,522 to maintenance and $41,044 to administration.

When you look at the Earnings Statement by Service Line, it appears that maintenance has the largest profit margin. This can be attributed to the fact that Finnegan’s design and installation customers often use them for their maintenance services too. I would have to agree with the earnings statement. The maintenance service line produces decent revenue that more than covers their expenses. Even if you add in the shared costs, it will still have the...
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