Auburn banking and loan company has six service departments: 1. Human Resources
ID: 2464884 • Letter: A
Question
Auburn banking and loan company has six service departments:
1. Human Resources (hires employees and manages benefits)
2. Duplicating (Performs copy services)
3. Janitorial (provides routine cleaning services)
4. Accounting (provides accounting services)
5. Graphic Design (designs forms)
6. Food services (provides free breakfast and lunch to employees)
The services are used by the company's two subsidiaries, Auburn Personal Banking and Auburn Business Banking.
a.) Suggest allocation bases to be used in allocating the service department costs to the two subsidiaries.
b.) Food services are used by employees in the human resources department. Would a share of food service costs be allocated to human resources under the direct method of allocation?
Explanation / Answer
Answer: a)
1. # of employees
2. copy paper used
3. storage space
4. # of sales
5.employee time spent on the designee
6.# of employees
Answer: b)
No, the HR department would not receive a share of food services costs because under the direct method, costs are not allocated between service departments.
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