Question
James Realty classifies its operations into three departments: Commercial Sales, Residential Sales, and Property Management. The owner, Mary Manalo, wants to know the full cost
James Realty classifies its operations into three departments: Commercial Sales, Residential Sales, and Property Management. The owner, Mary Manalo, wants to know the full cost of operating each department. Direct departmental costs and several allocation bases associated with each follow:
Available | Allocation | Bases | ||
Direct Costs | No. of Employees | Pesos of assets employed | Pesos of Revenues | |
Administration | $ 750,000 | 10 | $ 1,240,000 | n/a |
Accounting | $ 495,000 | 5 | $ 682,000 | n/a |
Promotion | $ 360,000 | 6 | $ 360,000 | n/a |
Commercial Sales | $ 5,245,000 | 21 | $ 500,000 | $ 4,500,000 |
Residential Sales | $ 4,589,510 | 101 | $ 725,000 | $ 9,500,000 |
Property Management | $ 199,200 | 13 | $ 175,000 | $ 500,000 |
The support departments are shown in a benefits-provided ranking. James has selected the following allocation bases for each department: number of employees for administration, pesos of assets employed for accounting, and pesos of revenue for promotion.
Required:
a. Use the step method to allocate the support department costs to the revenue-generating departments.
b. which department is apparently the most profitable.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started