Leyh Management Co. classifies its operations into three departments: commercial sales, residential sales, and property management. The owner, Ellen Leyh, wants to know the full cost of operating each department. Direct departmental costs and several allocation bases associated with each follow:

The support departments are shown in a benefits-provided ranking. Leyh has selected the following allocation bases for each department: number of employees/salespersons for administration, dollars of assets employed for accounting, and dollars of revenue for promotion.
a. Use the step method to allocate the support department costs to the revenue-generating departments.
b. Which department is apparently the most profitable?

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AVAILABLE ALLOCATION BASES Number of Employees/ Direct Costs Salespersons Assets Employed Revenue $1,500,000 990,000 720,000 10,490,000 9,179,000 398400 $2,480,000 1,364,000 720,000 900,000 1,440,000 540,000 n/a 20 15 12 Accounting Promotion Commercial sales Residential sales n/a $10,000,000 18,000,000 2,000,000 210