shiell corporation is a diversified manufacturing company with corporate headquarter 572501

Shiell Corporation is a diversified manufacturing company with corporate headquarters in Tampa, Florida. The three operating divisions are the Kennedy Division, the Plastic Products Division, and the Outer space Products Division. Much of the manufacturing activity of the Kennedy Division is related to work performed for the government space program under negotiated contracts. Shiell Corporation headquarters provides general administrative support and computer services to each of the three operating divisions. The computer services are provided through a computer time sharing arrangement. The central processing unit (CPU) is located in Tampa, and the divisions have remote terminals that are connected to the CPU by telephone lines. One standard from the Cost Accounting Standards Board provides that the cost of general administration may be allocated to negotiated defense contracts. Further, the standards provide that, in situations in which computer services are provided by corporate headquarters, the actual costs (fixed and variable) of operating the computer department may be allocated to the defense division based on a reasonable measure of computer usage. The general managers of the three divisions are evaluated based on the before tax performance of each division. The November 2000 performance evaluation reports (in millions of dollars) for each division are presented below:

Without a charge for computing services, the operating divisions may not make the most cost effective use of the Computer Systems Department’s resources. Outline and discuss a method for charging the operating divisions for use of computer services that would promote cost consciousness by the operating divisions and operating efficiency by the Computer Systems Department. (CMA adapted)