Management at C. Pier Press has decided to allocate costs of the paper’s two support departments (administration and human resources) to the two revenue-generating departments (advertising and circulation). Administration costs are to be allocated on the basis of dollars of assets employed; human resources costs are to be allocated on the basis of number of employees. The following costs and allocation bases are available: Department Direct Costs Number of Employees Assets Employed Administration $1,094,100 14 $541,940 Human resources 689,780 11 408,380 Advertising 1,340,920 17 1,067,360 Circulation 1,893,640 36 2,618,420 Totals $5,018,440 78 $4,636,100 c. Assuming that the benefits-provided ranking is the order shown in the table, use the step method to allocate the support department costs to the revenue-generating departments. Note: Round your final answers only to the nearest whole dollar. Amount allocated to Advertising: $ Amount allocated to Circulation: $ d. Using your answer to (c), what are the total costs of the revenue-generating departments after the allocations? Advertising total costs $ Circulation total costs $ e. Using the algebraic method, allocate the support department costs to the revenue-generating departments. Note: Round percentages in your calculation to the nearest whole percent (for example, round 34.5% to 35%). Note: Round your final answer to the nearest whole dollar. Amount allocated to Advertising: $ Amount allocated to Circulation: $ f. Using your answer to (e), what are the total costs of the revenue-generating departments after the allocations? Advertising total costs $ Circulation total costs $
Comprehensive support department allocations
Management at C. Pier Press has decided to allocate costs of the paper’s two support departments (administration and human resources) to the two revenue-generating departments (advertising and circulation). Administration costs are to be allocated on the basis of dollars of assets employed; human resources costs are to be allocated on the basis of number of employees. The following costs and allocation bases are available:
Department | Direct Costs | Number of Employees | Assets Employed | |
---|---|---|---|---|
Administration | $1,094,100 | 14 | $541,940 | |
Human resources | 689,780 | 11 | 408,380 | |
Advertising | 1,340,920 | 17 | 1,067,360 | |
Circulation | 1,893,640 | 36 | 2,618,420 | |
Totals | $5,018,440 | 78 | $4,636,100 |
c. Assuming that the benefits-provided ranking is the order shown in the table, use the step method to allocate the support department costs to the revenue-generating departments.
Note: Round your final answers only to the nearest whole dollar.
Amount allocated to Advertising: $
Amount allocated to Circulation: $
d. Using your answer to (c), what are the total costs of the revenue-generating departments after the allocations?
Advertising total costs $
Circulation total costs $
e. Using the algebraic method, allocate the support department costs to the revenue-generating departments.
Note: Round percentages in your calculation to the nearest whole percent (for example, round 34.5% to 35%).
Note: Round your final answer to the nearest whole dollar.
Amount allocated to Advertising: $
Amount allocated to Circulation: $
f. Using your answer to (e), what are the total costs of the revenue-generating departments after the allocations?
Advertising total costs $
Circulation total costs $
Cost allocation is a process of allocating overhead cost of service department to the operating department. This process helps on determining the total cost of the product or service produced by the operating departments.
The cost allocation process is also helpful in setting the appropriate price of the product or services. There are various methods of cost allocation which can be used in allocating the cost to operating departments.
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