IVAX manufactures commercial brushes in two operating divisions ( O1 and O2) and has two service departments
Question:
Required:
a. Allocate the costs of the two service departments to the two operating divisions using the direct allocation method.
b. Allocate the costs of the two service departments to the two operating divisions using the step- down allocation method where Human Resources is allocated first and Janitorial/ Maintenance is allocated second.
c. Allocate the costs of the two service departments to the two operating divisions using the step- down allocation method where Janitorial/ Maintenance is allocated first and Human Resources is allocated second.
d. Compute the Human Resource Department cost per employee under the three allocation methods (direct allocation, step- down allocations where Human Resources is first, and the step- down method where Janitorial/ Maintenance is first).
e. Compute the Janitorial/ Maintenance cost per square foot under the three allocation methods ( direct allocation, step- down allocations where Human Resources is first, and the step- down method where Janitorial/ Maintenance is first).
f. Briefly discuss the various factors IVAX management should consider in choosing how to allocate the two service department costs to the two operatingdivisions.
Step by Step Answer:
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman