Solution-How employees is used to allocate accounting costs

How employees is used to allocate accounting costs

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Reference no: EM13843544

Question #1

	Support Departments		Operating Department
	Accounting	Payroll	Marketing	Sales
Budgeted costs incurred before any allocations	83,000	240,000	800,000	420,000
Support supplied by Accounting
Budgeted Employees	---	20	40	30
Support supplied by Payroll
Budget processing time	300 minutes	---	1,900 minutes	1,500 minutes

The number of employees is used to allocate Accounting costs. Processing time is used to allocate Payroll costs.

1. Allocate the support departments' costs to the operating departments using the direct method.

2. Rank the support departments based on the percentage of their services provided to other support departments. Use this ranking to allocate the support departments' costs to the operating departments based on the step-down method.

Question #2

	Ingredient A	Ingredient B	Joint Costs
Joint costs (costs of processing the product to split-off point)			$350,000
Separable cost of processing beyond the split-off point	$426,000	$106,500
Beginning inventory (boxes)	0	0
Production and Sales (boxes)	14,200	7,100
Ending Inventory (boxes)	0	0
Selling price per box	$ 50	$ 25

Allocate the $350,000 Joint Costs using the Net Realizable Value method.

Question #3

	Division A	Division B
Total Assets	$30,000,000	$25,000,000
Current Liabilities	$ 5,000,000	$ 4,200,000
Operating Income	$ 2,200,000	$ 2,400,000
Required Rate of Return	15%	15%

Using operating income as a measure of income, and using Total Assets as a measure of investment:

1. Calculate Return on Investment for each division

2. Calculate Residual Income for each division

Reference no: EM13843544

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How employees is used to allocate accounting costs

Reference no: EM13843544

Reference no: EM13843544

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