Breakfast Bars has two support departments, Information Systems and Personnel. The Information Systems Department costs of $120,000 are allocated on the basis of hours used.  The Personnel Department costs of $30,000 are allocated based on the number of employees.  Costs of the two operating departments are $60,000 for Fruit Bars and $90,000 for Nut Bars.  Data on information systems hours used and number of employees are as follows:

Allocation Bases:	Information Systems	Personnel	Fruit	Nut
Information systems hours used	600	600	720	480
Number of Employees	10	20	40	120

REQUIRED:

• What is the cost of the Information Systems Department allocated to Fruit using the direct method?
• Using the step-down method, what is the cost of the Personnel Department allocated to Fruit if the support department having the highest cost is allocated first?
• Write the equations needed to allocate the costs of each support department using the reciprocal method.
• Identify and discuss one problem with using a single rate allocation method to develop charges for the use of services.

Answer rating: 100% (QA)

Direct method Department Information Systems Personnel Fruit Bars Nut Bars Direct overhead 120000 30000 60000 90000 Allocated Information Systems In P... View the full answer