Xyberspace Consulting, Inc

8 Pages Posted: 21 Oct 2008

See all articles by Luann J. Lynch

Luann J. Lynch

University of Virginia - Darden School of Business

Robert Galinsky

University of Virginia - Darden School of Business

Multiple version iconThere are 2 versions of this paper

Abstract

Xyberspace Consulting, Inc. is reconsidering the allocation of the costs associated with its Training and Educational Services Group (TESG), a shared-services or support department to its user departments. Currently, the company uses a single departmental rate to allocate actual training costs to the user groups, using the user groups' actual usage of TESG resources. The company is exploring whether it should allocate TESG fixed and variable costs separately, whether it should use budgeted or actual allocation rates and whether it should allocate costs based on budgeted or actual usage. This case is intended to give students exposure to allocating shared-services or support-department costs, understanding the implications of different allocation strategies, and evaluating whether and how allocation systems can facilitate strategy implementation.

Excerpt

UVA-C-2152

Rev. June 17, 2009

XYBERSPACE CONSULTING, INC.

Laura Barnes finished her chicken fajita and looked out upon Town Lake, shimmering under the fierce Texas sun. She had recently relocated to Austin from Silicon Valley to head up the Accounting Department for Xyberspace, a rapidly growing technology-consulting firm. Only two weeks on the job, she was being asked to resolve a controversy within the company. The controversy centered on the allocation of the costs associated with the company's Training and Educational Service Group (TESG) to each of the company's profit centers that used those services. Opinions on the issue were heated, and she had come to the lakeshore with her notes to calmly sort out the facts and consider the relevant issues. Her manager and Xyberspace's CFO, Martin Henry, had made it clear he expected a quick resolution of the controversy, which he felt was hurting company morale and had large strategic implications for Xyberspace.

Background

Xyberspace was a successful Internet consulting firm located in Austin, Texas. The company's Consulting Group provided e-strategy solutions to corporate and nonprofit clients, while the Customer Care Group performed IT implementation and provided telephone, e-mail, and on-site client support. As Austin became home to an increasing number of Internet start-ups as well as established high-tech firms, Xyberspace had grown rapidly. The company employed 800 people, 500 of whom were consultants and 250 of whom were Customer Care Technicians. The remaining 50 were either corporate officers or performed corporate functions such as accounting, marketing, training, and public relations. The company owned its own building in downtown Austin.

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Keywords: control systems, cost accounting, cost allocation

Suggested Citation

Lynch, Luann J. and Galinsky, Robert, Xyberspace Consulting, Inc. Darden Case No. UVA-C-2152, Available at SSRN: https://ssrn.com/abstract=1276597

Luann J. Lynch (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4721 (Phone)
434-243-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/lynch.htm

Robert Galinsky

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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