Refer to Exercise 9-33. Orlando, the manager of the New York unit, is unhappy with the results of the controller's study. He asks the controller to develop separate rates for fixed and variable costs in the Personnel Department. The controller reports back to Orlando that the rates would be as follows:

Required
a. Orlando argues that New York should only be allocated the variable costs from this system, because the company would have to pay the fixed costs even if New York did not exist. Compute the cost allocated to each unit using the approach Orlando prefers.
b. Do you agree with Orlando? Explain.

Transcribed Image Text:

Allocation based on Variable Rate Fixed Rate Total Rate Employees Transitions $20 per employee $750 per transition $60 per employee $2,000 per transition $80 per employee $2,750 per transition