Support Department Costs Problem A: Case Description The costs of operating the service departments (Personnel and...

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Support Department Costs Problem A: Case Description The costs of operating the service departments (Personnel and Administration) at Ashton Architectural are allocated to the revenue-generating departments (Commercial and Residential). The direct and allocated costs are accumulated to the revenue-generating departments and applied to architectural projects. Costs and allocation bases are presented below: Department Personnel (# of employees) $'s of Assets Employees Employed Direct Costs 2 $100,000 $125,000 Administration (S's of assets employed) 3 112,500 375,000 Residential 10 612,500 600,000 Commercial 15 925,000 725,000 Required: (a) Using the direct method, allocate the support department costs to the revenue producing departments. What are the total costs of each revenue-generating department after the allocation? (b) If the benefits-provided ranking is (1) Personnel and (2) Administration, use the step method to allocate the support department costs to the revenue-generating departments. What are the total costs of each revenue-generating department after the allocation? (c) Use the algebraic (or reciprocal) method to allocate the support department costs to the revenue-generating departments. What are the total costs of each revenue-generating department after the allocation? (d) Discuss the advantages and disadvantages of each method. Which method would you recommend for Ashton Architectural? 43 Support Department Costs Problem A: Case Description The costs of operating the service departments (Personnel and Administration) at Ashton Architectural are allocated to the revenue-generating departments (Commercial and Residential). The direct and allocated costs are accumulated to the revenue-generating departments and applied to architectural projects. Costs and allocation bases are presented below: Department Personnel (# of employees) $'s of Assets Employees Employed Direct Costs 2 $100,000 $125,000 Administration (S's of assets employed) 3 112,500 375,000 Residential 10 612,500 600,000 Commercial 15 925,000 725,000 Required: (a) Using the direct method, allocate the support department costs to the revenue producing departments. What are the total costs of each revenue-generating department after the allocation? (b) If the benefits-provided ranking is (1) Personnel and (2) Administration, use the step method to allocate the support department costs to the revenue-generating departments. What are the total costs of each revenue-generating department after the allocation? (c) Use the algebraic (or reciprocal) method to allocate the support department costs to the revenue-generating departments. What are the total costs of each revenue-generating department after the allocation? (d) Discuss the advantages and disadvantages of each method. Which method would you recommend for Ashton Architectural? 43

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a Using the direct method allocate the support department costs to the revenue departments The direct method allocates the support department costs ba... View the full answer