Allocation of Support Departments Western Sales, Eastern Sales, and International Sales are profit centers for XYZ...
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Allocation of Support Departments Western Sales, Eastern Sales, and International Sales are profit centers for XYZ Company. Human Resources, Information Systems, and Maintenance are support departments, and each is a cost center. Management has chosen to allocate support department costs to the profit centers. 1. For each support department, choose an appropriate allocation base from the Potential Allocation Bases and allocate the costs of those departments to the profit centers. Each profit center is to receive some of the cost of each of the support departments. Use the direct method of allocation. Use the space provided below to accomplish the allocation. 2. Calculate Operating Income, after allocation, for each of the profit centers. 3. In the text box below the worksheet, justify your choice of allocation base for each service department. Describe which of the general allocation criteria guided your choice of allocation base for each service department. Potential Allocation Bases Number of employees Number of computers used Hours of computer processing time used Computer network storage space used by each dept. (gigabytes) Square feet of space used by each dept. Total hours per month employees use social media, shopping sites, etc. for personal purposes. (IT Services can monitor this.) Revenues Direct Departmental Costs Departmental Margin Western Sales Eastern Sales 42 21 25 15 2,000 1,000 56 45 4,000 6,000 $ 210 1,500,000 $ 147 850,000 $ 998,000 $490,000 $ 502,000 $ 360,000 Allocation Worksheet Department Revenues Direct Costs Departmental Margin Allocation of HR Allocation of IS Allocation of Maintenance Operating Income Resources Human Information systems Maintenance Western Sales Eastern Sales ### ### $ $ 150,000 $ 998,000 1,500,000 $ 850,000 $490,000 $ 502,000 $360,000 Justify the allocation bases you used for each of the service departments: Allocation of Support Departments Western Sales, Eastern Sales, and International Sales are profit centers for XYZ Company. Human Resources, Information Systems, and Maintenance are support departments, and each is a cost center. Management has chosen to allocate support department costs to the profit centers. 1. For each support department, choose an appropriate allocation base from the Potential Allocation Bases and allocate the costs of those departments to the profit centers. Each profit center is to receive some of the cost of each of the support departments. Use the direct method of allocation. Use the space provided below to accomplish the allocation. 2. Calculate Operating Income, after allocation, for each of the profit centers. 3. In the text box below the worksheet, justify your choice of allocation base for each service department. Describe which of the general allocation criteria guided your choice of allocation base for each service department. Potential Allocation Bases Number of employees Number of computers used Hours of computer processing time used Computer network storage space used by each dept. (gigabytes) Square feet of space used by each dept. Total hours per month employees use social media, shopping sites, etc. for personal purposes. (IT Services can monitor this.) Revenues Direct Departmental Costs Departmental Margin Western Sales Eastern Sales 42 21 25 15 2,000 1,000 56 45 4,000 6,000 $ 210 1,500,000 $ 147 850,000 $ 998,000 $490,000 $ 502,000 $ 360,000 Allocation Worksheet Department Revenues Direct Costs Departmental Margin Allocation of HR Allocation of IS Allocation of Maintenance Operating Income Resources Human Information systems Maintenance Western Sales Eastern Sales ### ### $ $ 150,000 $ 998,000 1,500,000 $ 850,000 $490,000 $ 502,000 $360,000 Justify the allocation bases you used for each of the service departments:
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Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
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