Tuscaloosa National Bank has two service departments, the Human Resources (HR) D
ID: 2572970 • Letter: T
Question
Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments' output for the year is as follows Provider of Service User of Service HR Computing Deposit Loan HR Computing 20% 20% 70% 10% 60% 20% The budgeted costs in the two service departments for the year are as follows: $629,000 858,500 HR Computing Required: Use the reciprocal-services method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. (Do not round your intermediate calculations and round final answers to the nearest dollar amount.)Explanation / Answer
For allocating budgeted costs by using the reciprocal services method we have to make an equation
Total HR department cost = $629,000+20% of Total Computing Department Cost
Total Computing Department Cost = $858,500+20% of Total HR department cost
Step 1 : Suppose, Total HR department cost = H
Total Computing Department Cost = C
Now the equation will be
H = $629,000+20%*C equation 1
C = $858,500+20%*H equation 2
Step 2 : Now Put the Value of H in equation 2
C = $858,500+20%($629,000+0.20C)
C = $858,500+$125,800+0.04C
C-0.04C = $984,300
0.96C = $984,300
C = $984,300/0.96 = $1,025,313
Step 3 : By putting value of C in equation 1 (rounded off)
H = $629,000+20% of $1,025,313 = $629,000+$205,063 = $834,063
Step 4 : Allocation of HR and computing department cost to Deposit and Loan Department
User of service HR (in $) Computing /(in $) HR - 205,063 (20%) Computing 166,813 (20%) - Deposit 583,844 (70%) 615,187 (60%) Loan 83,406 (10%) 205,063 (20%) Total 834,063 (100%) 1,025,313 (100%)Related Questions
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