Responsibility Accounting 2

 1.  In this problem only the costs that increase because of the study in the market territory managed by Tillwater should be charged to him.  These costs are as follows: 

Expense Name

 

 

 

Researcher salary

           -  

Company car

 

   3,000 miles x $.18

 $     540

   Payment to other car user

     1,020*

Lodging and meals

     6,000

Trip home

        175

Supplies

        200

  Charge to Tillwater for study

 $  7,935

*The person doing this study worked an arrangement with the other person using the company car.  The other person will rent a car for $1,200 and the researcher doing the study for Tillwater will pay all costs above $180 because this is cheaper than renting a car for $3,000.

The territory was charged nothing for the use of the researcher if the company follows the policy of encouraging the use of the researcher's time. If the company wants to ration the use of the researcher's time, company managers will develop a charge for the researcher's time based on what these managers think will be required to get territory managers to hold down their usage of researchers. The higher the price company managers set for the researcher's time, the less of that time territory managers will use, and vice versa. The charge will be unrelated to what the researcher is paid; it will be based on what amount will bring about the behavior company managers want from territory managers and the price necessary to bring about that behavior.