Required information [The following information applies to the questions displayed below] Cranshaw Business Services (CBS) operates an information technology (IT) consulting firm out of two offices: Detroit and Los Angeles. Corporate services, such as legal, finance, and personnel, are centralized at the main office and the costs of these services are allocated to the two offices for the purposes of profitability assessment. The Detroit office is the original unit of the company and is well established, having long-time clients from the automotive and other manufacturing industries. The Los Angeles office is new with a smaller, much more varied, clientele. The costs of personnel services at CBS are currently allocated on the basis of the number of employees in each office. The annual costs of the personnel department total $380,000. Data for the fiscal year just ended show the following: Number of employees Number of new hires Number of employees departing Detroit Los Angeles 374 7 126 17 13. Required a. Compute the cost allocated to each unit using the current allocation system. b. The manager of the Detroit office believes that Detroit gets little benefit from the personnel office other than the occasional hire and termination help. The manager asks the controller's office to estimate the amount of Personnel Department cost associated with routine personnel matters (benefits and so on) and those associated with hiring employees and assisting with departing employees (transitions). The controller responds that if they separated the overhead costs on this basis, the cost of the Personnel Department for routine matters is $212,000 and the cost of the Personnel Department for transitions (each hire and each departure counts as one transition) is $168,000. Recompute the costs allocated to each unit using the separate rates for routine and transitional matters CBS are currently allocated on the basis of the number of employees in each office. The annual costs of the personne department total $380,000. Data for the fiscal year just ended show the following: Number of employees Detroit 374 Los Angeles 126 7 17 Number of employees departing. 3 13 Number of new hires Required a. Compute the cost allocated to each unit using the current allocation system b. The manager of the Detroit office believes that Detroit gets little benefit from the personnel office other than the occasional hire and termination help. The manager asks the controller's office to estimate the amount of Personnel Department cost associated with routine personnel matters (benefits and so on) and those associated with hiring employees and assisting with departing employees (transitions). The controller responds that if they separated the overhead costs on this basis, the cost of the Personnel Department for routine matters is $212,000 and the cost of the Personnel Department for transitions (each hire and each departure counts as one transition) is $168.000 Recompute the costs allocated to each unit using the separate rates for routine and transitional matters. Total Allocated Cost Detroit Los Angeles a Using current allocation system b. Using separate rates 0 Required information. [The following information applies to the questions displayed below] Cranshaw Business Services (CBS) operates an information technology (IT) consulting firm out of two offices: Detroit and Los Angeles. Corporate services, such as legal, finance, and personnel, are centralized at the main office and the costs of these services are allocated to the two offices for the purposes of profitability assessment. The Detroit office is the original unit of the company and is well established, having long-time clients from the automotive and other manufacturing industries. The Los Angeles office is new with a smaller, much more varied, clientele. The costs of personnel services at CBS are currently allocated on the basis of the number of employees in each office. The annual costs of the personnel department total $380,000. Data for the fiscal year just ended show the following Number of employees Detroit 374 Los Angeles 126 Number of new hires 7 17 Number of employees departing 3 13 The manager of the Los Angeles office is now unhappy with thresults of the controller's study. The manager asks the controller to develop separate rates for fixed and vanable costs in the Personnel Department. The controller reports back to the Los Angeles manager that the costs would be as follows: Allocation based on Employees Transitions Required: Variable Cost $ 86,000 69,000 Fixed Cost $ 126,000 99,000 Total Cost $212,000 168,000 a. The manager claims that the Los Angeles office should only be allocated the variable costs from this system, because the company would have to pay the fixed costs even if the Los Angeles office did not exist Compute the cost allocated to each unit using the Annroach the Ins Anneles mananer prefere The manager of the Los Angeles office is now unhappy with the results of the controller's study. The manager asks the controller to develop separate rates for fixed and variable costs in the Personnel Department. The controller reports back to the Los Angeles manager that the costs would be as follows: Allocation based on Employees Transitions Required: Variable Cost $86,000 69,000 Fixed Cost $ 126,000 Total Cost $212,000 99,000 168,000 a. The manager claims that the Los Angeles office should only be allocated the variable costs from this system, because the company would have to pay the fixed costs even if the Los Angeles office did not exist. Compute the cost allocated to each unit using the approach the Los Angeles manager prefers. Detriot Los Angeles Total Allocated Cost