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Marginby, Co has two support departments, Human Resources and Janitorial, and two revenue departments, Retail and Wholesale. All costs are regarded as strictly variable. Human
Marginby, Co has two support departments, Human Resources and Janitorial, and two revenue departments, Retail and Wholesale. All costs are regarded as strictly variable. Human Resources allocates cost based on number of employees and Janitorial allocates cost based on service hours. For April, the following is available: Support Department Revenue Departments Human Resources Janitorial Retail Wholesale Direct Costs $ 76,000 $ 25,000 $ 128,000 $ 115,000 Actual Activity: Employees 5 20 5 Service Hours 120 510 170 REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Retail? What is the total cost allocated to Wholesale? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Human Resources Department cost first. What is the total cost allocated to Retail? What is the total cost allocated Wholesale? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments
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