Xyberspace consulting, ING. Case analysis The main controversy confronting Xyberspace is the method of allocating expenses associated to their training and educational services group in 1999. Since the services group’s actual cost has gone beyond its original budget and the consulting group didn’t received as many as training session as planned at the beginning of the year, the actual allocation rate charged to each training session has changed to $665, resulting in an extra $112 per session and 67,200 in total for consulting group. This result no wonder makes David Anderson feel unfair because his group have to cover some overrun spending which originally allocated to training groups while training groups’ absence for training session is the reason for increasing the cost.
From the situation Xyberspace faced up to, we can conclude that even though allocating cost based on actual usage can allocate all the expenses, it is not practical and reasonable enough. It is hard for services group to control cost. As David says the group can just pass the budget variance off to other groups and they don’t need to responsible for any inaccurate of their budget. Additionally, the single rate method fail to explicitly reflect the real cause-and-effect relationship of the cost pool to the cost objects. Among services group’s expenses, there are some indirect costs that are not directly related to any particular training sessions and amounts of sessions. Both consulting and customer group should pay for these indirect costs no matter how many session they actually participate. As these drawbacks of actual cost allocation we should consider some other alternatives. Sticking to service’s group budget is better to help Xyberspace to prevent departments from intervening price fluctuations and force the users spent principle more efficient. However, it is not wise just allocating