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Strategic Managerial Accounting – A Primer for the IT Professional by Gopal Saxena

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CHAPTER 3

Allocation of Costs

Think cost control not cost cutting: effective cost management does not always mean finding the least expensive.

—Nathan S. Collier

Case Study

Software Limited (SL) is an information technology (IT) company based in Bangalore, India, that offers services for high-end software development. One of its marquee clients is General Manufacturing Inc. (GMI), for which it is executing a large long-term project for software development services. The CTO (Chief Technology Officer) of GMI, who is spearheading the project, has informed SL that he has $150,000 left over from his current year’s IT budget. He wants to utilize this unused fund to develop another application for which there was a long-standing demand from GMI customers. ...

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