1. ABC PE 2 
B. What are the cost objects?  
The Companies: Company A, Company B, Company C, and Company D 
Cost Object = The product, service, or object that created the costs
C. How much of the installation's cost of $100,000 will be allocated or charged back to each company?  
The problem says to use the number of buildings to allocate cost
You are given a total cost of $100,000 (Cost Pool) 
Step 1- find the total number of buildings (Driver Units)
Company A bldgs
Company B bldg
Company C bldg
Company D bldg
Total # of Buildings = Company A Total bldgs + Company B Total bldgs + Company C Total bldgs. + Company C total bldgs
= 2 bldgs. + 1 bldg + 1 bldg + 1 Bldg
= 5 total number of bldgs
Step 2 alternate solution (proportion method) –(slide 21 from class)
Step 2- Allocation rate = (slide 21 from class)
Total Cost pool / Total # Driver Units
Proportion method = # of Driver units used / total # of driver units
Company A= 2 bldgs. * $20,000 per bldg = $40,000
Total Costs / Total number of bldgs
Company B= 1 bldg * $20,000 per bldg= $20,000
Company A= 2 bldgs / 5 total bldgs. = 0.40
=0.40 * 100,000= $40,000
= $100,000 / 5 total bldgs
Company C= 1 bldg * $20,000 per bldg= $20,000
Company B= 1 bldg / 5 total bldgs. = 0.20
=0.20 * 100,000= $20,000
= $20,000 per bldg.
Company D= 1 bldg * $20,000 per bldg = $20,000
Company C= 1 bldg / 5 total bldgs. = 0.20
=0.20 * 100,000= $20,000
Company D= 1 bldg / 5 total bldgs. = 0.20
=0.20 * 100,000= $20,000

2. Not surprisingly the Company Commanders were not pleased to hear about the facilities assessment. However, Company B brought up a valid point : Why
should his organization, which occupies a small building receive the same allocation as Company D, which occupies a much larger building? Taking this into
consideration, you decided to re-allocate the $100,000 on the basis of square footage occupied by each company.
What is the cost driver now? Does it appear to give a true picture of cost? Allocate the costs back to each company.
The cost driver is per square foot of bldg. space; it gives a better picture of the cost
Step 1- find the total number of square feet
Company A ,000 Total Sq FT
Company B ,000 Total Sq Ft
Company C ,000 Total Sq Ft
Company D ,000 Total Sq Ft
= 50,000 Total Sq Ft
Step 2 alternate solution (proportion method) –(slide 21 from class)
Step 2- Allocation rate = (slide 21 from class)
Total Cost pool / Total # Driver Units
Proportion method = # of Driver units used / total # of driver units
Company A= 20,000 Sq Ft. * $2 per sq ft= $40,000
Company A= 20,000 Sq Ft/ 50,000 Sq Ft = 0.40
=0.40 * 100,000= $40,000
Total Costs / Total Square feet
Company B= 1,000 Sq Ft * $2 per sq ft = $2,000
Company B= 1,000 Sq Ft / 50,000 Sq Ft = 0.02
=0.02 * 100,000= $2,000
= $100,000 / 50,000 total Sq Ft
Company C= 9,000 Sq Ft * $2 per sq ft = $18,000
= $2 per Sq Ft
Company C= 9,000 Sq Ft / 50,000 Sq Ft = 0.18
=0.18 * 100,000= $18,000
Company D= 20,000 Sq Ft * $2 per Sq Ft = $40,000
Company D= 20,000 Sq Ft / 50,000 Sq Ft = 0.40
=0.40 * 100,000= $40,000