Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

book: Fundamentals of cost accounting chapter 9: Activity based costing The Personnel Department at LastCall Enterprises handles many administrative tasks for the two divisions that

book: Fundamentals of cost accounting

chapter 9: Activity based costing

The Personnel Department at LastCall Enterprises handles many administrative tasks for the two divisions that make up LastCall: LaidBack and StressedOut. LaidBack division manages the companys traditional business line. This business, although lucrative, is currently not growing. StressedOut, on the other hand, is the companys new business, which has experienced double-digit growth for each of the last three years.

The cost allocation system at LastCall allocates all corporate costs to the divisions based on a variety of cost allocation bases. Personnel costs are allocated based on the average number of employees in the two divisions.

There are two basic activities in the Personnel Department. The first, which is called employee maintenance, manages employee records. Virtually all of this activity occurs when employees are hired or leave the company. The other activity is payroll, which is an ongoing activity and requires the same amount of work for each employee regardless of the employees salary.

Assorted data for LastCall for the last year follow:

LaidBack StressedOut Total
Number of employees (average) 110 30 140
Employees hired/leaving 7 29 36

The Personnel Department incurred the following costs during the year:

Employee maintenance $ 252,000
Payroll 28,000
Total $ 280,000

Required:

a. Under the current allocation system, what are the costs that will be allocated from personnel to LaidBack? To StressedOut? (Do not round intermediate calculations.)

b. Suppose the company implements an activity-based cost system for personnel with the two activities, employee maintenance and payroll. Use the number of employees hired/leaving as the cost driver for employee maintenance costs and the average number of employees for payroll costs. What are the costs that will be allocated from personnel to LaidBack? To StressedOut?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Integrated Audit Practice Case

Authors: David S. Kerr, Randal J. Elder, Alvin A. Arens

7th Edition

0912503688, 978-0912503684

More Books

Students also viewed these Accounting questions

Question

=+ Do you think it is a wise investment of the firm?

Answered: 1 week ago