Question
ezto.mheducation.com/hm.tpx?--0.71 39864 785335752 1461 467009448 The Personnel Department at LastCall Enterprises handles many administrative tasks for the two divisions that make up LastCal LaidBack and StressedOut LaidBack division manages the company's traditional business ine. This business, athough lucrative, is currently not growing Stressedout, on the other hand, is the company's new business, which has experienced double-digit growth for each of the last three years The cost allocation system at LastCall alocates all corporate costs to the divisions based on a variety of cost allocation bases. Personnel costs are allocated based on the average number of employees in the two There are two basic activities in the Personnel Department. The first, which is called employee maintenance, manages employee records. Vitualily all of this activity occurs when employees are hired or leave the company The other activity is payroil, which is an ongoing activity and requires the same amount of work for each employee regardless of the employee's salary Assorted data for LastCall for the last year follow Number of employees (average) Employees hiredleaving LaidBack Stressedout Total 133 25 101 20 The Personnel Department incurred the following costs during the year Employee maintenance s 142 500 26 600
Explanation / Answer
Solution:
1) Statement showing costs that are allocated from personnel to LaidBack & Stressed Out using current allocation system:
Working Note:
Rate per employee = 169,100/ 133 = 1,271.43
LaidBack = 1,271.43 * 101 = 128,414.43
StressedOut = 1,271.43 * 32 = 40,685.76
2) Statement showing costs that are allocated from personnel to LaidBack & Stressed Out using activity based cost system:
Working Note:
Employee maintenance cost per employee hired/ leaving = 142,500/ 25 = 5,700
LaidBack = 5,700 * 5 = 28,500
StressedOut = 5,700 * 20 = 114,000
Payroll cost per employee (average) = 26,600/ 133 = 200
LaidBack = 200 * 101 = 20,200
StressedOut = 200 * 32 = 6,400
Rate LaidBack StressedOut Total Allocated costs 1,271.43 128,414.43 40,685.76 169,100
