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Ignore consideration of excess capacity discussed in question 3 below for this answer. Please discuss any additional information that you feel is needed.
No, I would not recommend TRU continue to allocate the building-related costs only to the preschool program because it is not an accurate way to compute the actual costs for Birthday Party product. I would suggest TRU to use the activity based costing allocation method. To use this method, I would need additional information on: exact labor hours spent both on preschool class and birthday party, and the exact number of children who are attending preschool program and the birthday party...
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