Mackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company’s human resources (HR) department. The annual costs of the HR department total $14,000,000 a year. You have the following selected information about the two divisions: 

Required

a. What is the HR cost that is charged to each division if the number of employees is used as the allocation basis?

b. What is the HR cost that is charged to each division if the wage and salary expense total is used as the allocation basis?

c. The cost of HR is necessary regardless of which division uses it. Why is the method of allocation important?

Transcribed Image Text:

Northern... Southern.. Number of Employees 2,310 1,890 Wage and Salary Expense ($000) $173,600 106,400