1. ABC PE 3
1. What is the best cost driver for overhead cost related to the utilities portion?
a. Number of buildings
b. Number of vehicles
c. Number of square footage of each building
Provides most information for utilities cost—buildings
can be different sizes
2. Which of the following are the cost objects for allocating overhead costs?
a. Units
b. Vehicles
c. Buildings
Cost Object = The product, service, or object that created the costs

2. = $355,752 is the cost for Company A = $6.48 per Sq Ft
3. What is the allocation rate assuming all
costs are allocated based on building
square footage?
a. $1.76 per square foot
b. $6.48 per square foot
c. $5.71 per square foot
Step 1- first find all costs
Building Maintenance costs- $370,000 for labor and $65,000 for materials and equipment.
= $370,000 + $65,000= $435,000
Grounds upkeep- $200,000 for labor, $30,000 for equipment maintenance and $50,000 for supplies.
=$200,000 +$30,000 + $50,000= $280,000
4. Using the rate that you found in
question 3, how much would the cost be for
Company A?
a. $355,752
b. $252,720
c. $356,400
Utility costs= $250,000
Total costs =   =$965,000
Step 2- find total square feet for all the buildings
Company A bldgs * 6,100 sq ft / bldg. = 54,900 Total Sq Ft
Company B bldgs * 7,800 sq ft / bldg. = 39,000 Total Sq Ft
Company C bldgs * 5,500 sq Ft / bldg. = 55,000 Total Sq Ft
Total Square feet = = 148,900 Total Sq Ft
Step 3- Allocation rate (slide 21 from class)
Step 4- Company A has 54,900 SQ FT
= Total Cost pool / Total # Driver Units
The allocation rate is $6.48 per Sq ft
= Total Costs / Total Sq Ft
=54,900 SQ Ft * $6.48 per Sq ft=
= $965,000 / 148,900 Total Sq Ft
= $355,752 is the cost for Company A
= $6.48 per Sq Ft

3. =$402,115 close enough (rounding)
5. What is the amount of the total
overhead cost for Company C assuming
all cost are allocated based on using the
number of buildings?
a. $361,872
b. $201,040
c. $402,080
Step 1- first find all costs (Cost Pool)
Building Maintenance costs- $370,000 for labor and $65,000 for materials and equipment.
= $370,000 + $65,000= $435,000
Grounds upkeep- $200,000 for labor, $30,000 for equipment maintenance and $50,000 for supplies.
=$200,000 +$30,000 + $50,000= $280,000
Utility costs= $250,000
Total costs =   =$965,000
Step 2- find the total number of buildings (Driver units)
Company A bldgs
Company B bldgs
Company C bldgs
Total Number of Buildings = = 24 bldgs
Step 3- Allocation rate = (slide 21 from class)
Total Cost pool / Total # Driver Units
Step 3 alternate solution (proportion method) –
(slide 21 from class)
Total Costs / Total number of bldgs
Proportion method =
= $965,000 / 24 bldgs
= # of Driver units used / total # of driver units
= $40,208 per bldg.
= 10 bldgs / 24 bldgs
=0.4167= Proportion rate for Company B
Company C= 10 bldgs
= $40,208 per bldg. * 10 bldgs = $402,080
= * Total cost
= * $965,000
=$402,115 close enough (rounding)