State University's College of Business is divided into three departments, accounting, marketing, and management. Relevant information for each department is provided below: The Dean of the College of Business is trying to assign funds from the operating budget to the three departments. Assuming that the chair of each department is trying to attain the highest funding possible for his/her department, which of the following most accurately describes the allocation base that each chair will favor?
A) The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty.
B) The chair of the Accounting department and the chair of the Management department will want to use the number of faculty.
C) The chair of the Marketing department will want to use number of students, while the chair of the Accounting department will want to use number of classes per semester.
D) The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty.

Question

State University's College of Business is divided into three departments, accounting, marketing, and management. Relevant information for each department is provided below:  The Dean of the College of Business is trying to assign funds from the operating budget to the three departments. Assuming that the chair of each department is trying to attain the highest funding possible for his/her department, which of the following most accurately describes the allocation base that each chair will favor?
A) The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty. 
B) The chair of the Accounting department and the chair of the Management department will want to use the number of faculty. 
C) The chair of the Marketing department will want to use number of students, while the chair of the Accounting department will want to use number of classes per semester. 
D) The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty.

Quizplus · Accepted Answer

Recall that the allocation rate equals the total cost to be allocated divided by the cost driver (allocation base). Here, the funds to be assigned from the operating budget represent the total cost to be allocated. Each department chair will favor the rate that provides the highest allocation of budget funds as shown below:
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State University's College of Business Is Divided into Three Departments