2) Broadway Department Store allocates the personnel and payroll department cost
ID: 2414714 • Letter: 2
Question
2) Broadway Department Store allocates the personnel and payroll department costs to the sales departments of Shoes, Automotive, and Clothing. Human resources (personnel) and payroll also provide services to each other. Personnel costs are allocated by number of employees and payroll costs are allocated by gross payroll. Costs and other information for January were as follows:
Personnel
Payroll
Shoes
Automotive
Clothing
Current Costs
$ 13,800
$ 6,400
$ 24,400
$ 40,000
$ 31,500
Gross Payroll
$ 3,000
$ 1,500
$ 5,600
$ 8,700
$ 4,050
Number of Employees
5
3
8
15
4
Required:
Prepare a schedule that includes the total cost of operating the sales departments for January. Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.
Personnel
Payroll
Shoes
Automotive
Clothing
Current Costs
$ 13,800
$ 6,400
$ 24,400
$ 40,000
$ 31,500
Gross Payroll
$ 3,000
$ 1,500
$ 5,600
$ 8,700
$ 4,050
Number of Employees
5
3
8
15
4
Explanation / Answer
Service Departments Producing Departments Payroll Personnel Housewares Clothing Furniture Total costs $ 0 0 $30,434 $50,774 $116,100 Service Departments Producing Departments Payroll Personnel Housewares Clothing Furniture Total Direct department cost $ $6,400 $13,800 $24,400 $40,000 $31,500 $116,100 Allocation of Payroll department costs -$6,400 $899 $1,679 $2,608 $1,214 $0 $0 $14,699 $26,079 $42,608 $32,714 $116,100 Allocation of Personnel department costs -$14,699 $4,355 $8,166 $2,178 $0 Total producing department costs $ $0 $0 $30,434 $50,774 $34,892 $116,100 Allocation of Payroll department costs in the ratio of gross payroll 3000 : 5600: 8700 : 4050. Total 21350 Allocation of Personnel department costs in the ratio of number of employees 8 : 15 : 4. Total 27
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