The municipal water and desalinization utility in a California city currently allocates some costs for maintenance shop workers to pumping stations based on the number of pumps at each station. At the last Director’s Semiannual Meeting, a suggestion was made to change the allocation basis to the number of trips that pump service personnel make to each station, because some stations have old pumps that require more maintenance. Information about the stations is below. The indirect cost budget is $20,000 per pump. (a) Allocate the budget to each station based on the number of service trips. (b) Determine the old allocation on the basis of number of pumps and comment on any significant differences in the amounts allocated to the stations.
 FIGURE 1.png)
Total budget = 19 pumps × $20,000/pump = $380,000
(a) Total service trips = 190 + 55 + 38 + 104 = 387
Allocation/Trip = 380,000/387 = $981.91
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 ANSWER.png)
Sylvester and Spicewood went down; Laurel went up by 2.6 times; 7th St went up 60%.
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