Exeter Group is a large retail company that has brick-and-mortar outlets throughout the Southeast. They have been in business for many years, but two years ago started an online sales channel to offset slowing in-store sales. The human resources (HR) department at Exeter handles tasks for the two divisions that make up Exeter: Retail and Online. Retail Division manages the companys traditional business line. This business, although still profitable, is currently not growing and may be shrinking slightly. Online Division, on the other hand, has experienced double-digit growth from the beginning.

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

There are two basic activities in the HR Department. The first is employee maintenance (payroll administration, benefits, and so on), which is an ongoing activity and requires the same amount of work for each employee regardless of the employees salary. The second, called turnover, handles new and departing employees, including all records and orientations (for new employees) and assurance of procedural integrity (for all departures). Virtually all of this activity occurs when employees are hired or leave the company.

Assorted data for Exeter for the most recent year follow:

	Retail	Online	Total
Number of employees (average)	17,660	2,340	20,000
Employees hired/leaving	720	1,640	2,360

The HR Department incurred the following costs during the same year.

Employee maintenance	$ 4,280,000
Turnover	4,720,000
Total	$ 9,000,000

Required:

Under the current allocation system, what are the costs that will be allocated from HR to Retail Division? To Online Division?

Suppose the company implements an activity-based cost system for HR with the two activities, employee maintenance and turnover. Use the average number of employees as the cost driver for employee maintenance costs and the average number of employees hired or leaving for turnover costs. What are the costs that will be allocated from HR to Retail? To Online?