Question

Leander Mfg. has three support departments (human resources, administration, and maintenance) and two revenue-generating departments (assembly and finishing). The company uses the step method to allocate support department costs to operating departments. In October, human resources incurred $1,008,000 of costs, administration incurred $1,562,400, and maintenance incurred $476,000. Proportions of services provided to other departments for October follow. Human Resources Administration Maintenance Human resources 10% 5% Administration 10% 15 Maintenance 15 10 Assembly 40 50 45 Finishing 35 30 35 a. Assume that the departments are listed in a benefits-provided ranking. Note: Do not round proportions in your calculations; round your final answer to the nearest whole dollar. 1. What amount of cost should be assigned from human resources to each of the other departments

Answer 1

Answer:

Leander Mfg.

Human resources cost assigned to other departments:

Administration                     100,800 (10%)

Maintenance                        151,200 (15%)

Assembly                            403,200 (40%)

Finishing                             352,800 (35%)

Total HR costs               $1,008,000

Explanation:

a) Data and Calculations:

                                    Human Resource  Administration  Maintenance

Direct costs incurred        $1,008,000         $1,562,400      $476,000

Human resources                                                10%                   5%

Administration                       10%                                                15

Maintenance                         15                           10

Assembly                              40                          50                   45

Finishing                               35                          30                   35

Allocation of Costs:

                                    Human Resource  Administration    Maintenance

Direct costs incurred  $1,008,000            $1,562,400            $476,000

Human resources      ($1,008,000)                100,800                151,200

Administration                  100,800 (10%) ($1,663,200)              184,800

Maintenance                     151,200 (15%)        184,800 (10%) ($812,000)

Assembly                        403,200 (40%)      924,000 (50%)   456,750 (45%)

Finishing                         352,800 (35%)      554,400 (30%)   355,250 (35%)

Human resources cost assigned to other departments:

Administration                     100,800 (10%)

Maintenance                        151,200 (15%)

Assembly                            403,200 (40%)

Finishing                             352,800 (35%)

Total HR costs               $1,008,000

Administration costs assigned to other departments:

Maintenance                             184,800 ($1,663,200 * 10/90)

Assembly                                 924,000 ($1,663,200 * 50/90)

Finishing                                  554,400 ($1,663,200 * 30/90)

Total administration costs $1,663,200

Maintenance costs assigned to other departments:

Assembly                              456,750 ($812,000 * 45/80)

Finishing                               355,250 ($812,000 * 35/80)

Total administration costs  $812,000