Determine the best method to allocate of common costs

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Reference no: EM13139519

TCO6 Booth Financial Services, LLC has two revenue producing departments, Financial Planning and Business Consulting. The accounting department is trying to determine the best method to allocate $1,000,000 of common costs (secretarial staff, reception personnel etc), either by salary or number of employees.

Information on the revenue departments are as follows:

Financial Planning, 150 employees with total salaries of $10,000,000

Business Consulting 50 employees with total salaries of $5,000,000

A Allocate the $1,000,000 common costs to the two revenue departments using both methods.

B Why are allocations called arbitrary?

Reference no: EM13139519

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