uestion ler, has two operating departments-corporate sales and consumer sales-an
ID: 2587594 • Letter: U
Question
uestion ler, has two operating departments-corporate sales and consumer sales-and two support departmer les department conducts merchandising and marketing operations independently. 1-books uses number Data Table Support DepartmentsOperating Departments Human InformationCorporate Consumer ResourcesSystems Sales Sales Budgeted costs incurred during any interdepartment cost allocations Support work supplied by human resources department 76.000 S 237000 997,000 S 482,000 Budgeted number of employees Support work supplied by information systems department 21 45 31 Budgeted processing time (in minutes) 330 1,830 1.500 pport places Print Done m anvy tist or enter any number in the input fielas and then click Check Answer howin Clear A Final CheckExplanation / Answer
Solution:
Support Departments
Operating Departments
Total
HR
Info Systems
Corporate
Consumer
Costs incurred
$76,000
$237,000
$997,000
$482,000
$1,792,000
Allocation of HR Costs
($76,000)
$45,000
$31,000
Allocation of Info Systems cost
($237,000)
$130,243
$106,757
Total budgeted costs of operating departments
$1,172,243
$619,757
$1,792,000
Determination of percentages:
Support Departments
Operating Departments
Total
HR
Info Systems
Corporate
Consumer
Support supplied by HR
Budgeted number of employees
21
45
31
97
percentage
21.65%
46.392%
31.959%
100%
reallocated percentages
59.210%
40.789%
Support supplied by Info Systems-
Budgeted processing time
330
1,830
1,500
3,660
percentage
9.02%
50%
40.984%
100%
reallocated percentages
54.955%
45.045%
Under the step-down method costs of some support departments are allocated to other support departments. But once, a support department’s cost has been allocated, no subsequent costs are allocated back to it.
To choose which support department to be allocated first is based on the criteria of highest percentage of the total support provided to other support departments.
For the present question, the HR department provides 21.65% of its total services to Info Systems, while Info Systems provides only 9.02% of its total services to HR department.
Hence, the HR department is ranked first and its cost is allocated.
Support Departments
Operating Departments
Total
HR
Info Systems
Corporate
Consumer
Costs incurred
$76,000
$237,000
$997,000
$482,000
$1,792,000
Allocation of HR Costs
($76,000)
$16,454
$35,258
$24,288
0.00%
$253,454
($253,454)
$139,286
$114,168
$253,454
Total budgeted cost of operating departments
$0
$1,171,544
$620,456
$1,792,000
Note:
The allocation of HR costs to support and operating departments is based on the following percentages – 21.65%, 46.392% and 31.959%, respectively.
The allocation of Info System costs to operating departments based on the percentages of 54.955% and 45.045%.
Support Departments
Operating Departments
Total
HR
Info Systems
Corporate
Consumer
Costs incurred
$76,000
$237,000
$997,000
$482,000
$1,792,000
Allocation of HR Costs
($76,000)
$45,000
$31,000
Allocation of Info Systems cost
($237,000)
$130,243
$106,757
Total budgeted costs of operating departments
$1,172,243
$619,757
$1,792,000
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