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The Personnel Department at Hemandez Bros. Is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the

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The Personnel Department at Hemandez 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 located to each unit based on the number of employees in order to determine unit profitability. The current rate is $580 per employee. Data for the fiscal year just ended show the following: Mai New York Number of employees 1.280 380 Number of new hires 18 28 Number of employees departing 12 22 Orlando, the manager of the New York unt, is unhappy with the results of the controller's study. He asks the controller to develop separate rates for food and variable costs in the Personnel Department. The controller reports back to Orlando that the rates would be as follows: Allocation based on Variable Rate Fixed Rate Total Rate Employees $ 90 per employee $190 per employee $ 280 per employee Transitions $2,080 per transition $4,145 per transition $ 6.225 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

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