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Please help, I cannot figure out the answer for Miami. Thanks! ! Required information The Personnel Department at Hernandez Bros. is centralized and provides services
Please help, I cannot figure out the answer for Miami. Thanks!
! Required information The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami 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 $540 per employee. Data for the fiscal year just ended show the following Miami 1,240 Number of employees Number of new hires Number of employees departing New York 340 24 26 14 16 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 $ 70 per employee $2,040 per transition Fixed Rate $170 per employee $3,885 per transition Total Rate $ 240 per employee $ 5,925 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 $ 125,800Step by Step Solution
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