Exercise 9-34 Unitwide versus Department Allocation-Decision Making (LO 9-1, 2, 3) The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miarni and New York. The Miarni unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $580 per employee. Data for the fiscal year just ended show the following: Miami New York 1.260360 Number of employees Number of now hires Number of employees departing 24 Orlando, the manager of the New York unit, is unhappy with the results of the controller's study. He asks the controller to develop separate rates for fixed and variable costs in the Personnel Department. The controller reports back to Orlando that the rates would be as follows: Allocation based on Employees Transitions Variable Rate $ 80 per employee $2.060 per transition Fixed Rate $ 180 per employee $4,015 per transition Total Rate S 260 per employee S 6,075 per transition Required: a. Orlando argues that New York should only be allocated the variable costs from this system, because the company would have to pay the fixed costs even if New York did not exist. Compute the cost allocated to each unit using the approach Orlando prefers. Total Allocated Cost Miami New York