Question
Creative Architects Pty Ltd (CA) has two primary revenue-generating departments - Residential Building and Commercial Buildings; and two support departments - Human Resources and Administration.
Creative Architects Pty Ltd (CA) has two primary revenue-generating departments - Residential Building and Commercial Buildings; and two support departments - Human Resources and Administration. CA uses the direct method to allocate the costs incurred by the support departments to each of the primary departments as overhead costs. Human Resources uses the number of employees to allocate its costs, while Administration uses the dollar amount of assets employed to allocate its costs. The primary department costs are then applied to corresponding architectural projects. The following data is extracted from CA's information system.
Department | Number of employees | Assets Employed ($) | Costs to be allocated ($) |
Human Resources | 2 | $100,000 | $125,000 |
Administration | 3 | $112,500 | $375,000 |
Residential Buildings | 10 | $900,000 | |
Commercial Buildings | 15 | $600,000 |
How much Human Resource overhead cost would be allocated to the Residential Buildings department?
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