Comprehensive support department allocations Management at C. Pier Press has decided to allocate costs of the paper’s two support departments (administration and human resources) to the two revenue-generating departments (advertising and circulation). Administration costs are to be allocated on the basis of dollars of assets employed; human resources costs are to be allocated on the basis of number of employees. The following costs and allocation bases are available: Department Direct Costs Number of Employees Assets Employed Administration $1,094,100 14 $541,940 Human resources 689,780 11 408,380 Advertising 1,340,920 17 1,067,360 Circulation 1,893,640 36 2,618,420 Totals $5,018,440 78 $4,636,100 e. Using the algebraic method, allocate the support department costs to the revenue-generating departments. Note: Round percentages in your calculation to the nearest whole percent (for example, round 34.5% to 35%). Note: Round your final answer to the nearest whole dollar. Amount allocated to Advertising: $1,265,530 Amount allocated to Circulation: $ f. Using your answer to (e), what are the total costs of the revenue-generating departments after the allocations? Advertising total costs $ Circulation total costs $
Comprehensive support department allocations
Management at C. Pier Press has decided to allocate costs of the paper’s two support departments (administration and human resources) to the two revenue-generating departments (advertising and circulation). Administration costs are to be allocated on the basis of dollars of assets employed; human resources costs are to be allocated on the basis of number of employees. The following costs and allocation bases are available:
| Department | Direct Costs | Number of Employees | Assets Employed | |
|---|---|---|---|---|
| Administration | $1,094,100 | 14 | $541,940 | |
| Human resources | 689,780 | 11 | 408,380 | |
| Advertising | 1,340,920 | 17 | 1,067,360 | |
| Circulation | 1,893,640 | 36 | 2,618,420 | |
| Totals | $5,018,440 | 78 | $4,636,100 |
e. Using the algebraic method, allocate the support department costs to the revenue-generating departments.
Note: Round percentages in your calculation to the nearest whole percent (for example, round 34.5% to 35%).
Note: Round your final answer to the nearest whole dollar.
Amount allocated to Advertising: $1,265,530
Amount allocated to Circulation: $
f. Using your answer to (e), what are the total costs of the revenue-generating departments after the allocations?
Advertising total costs $
Circulation total costs $
Cost allocation is a method of delivering assistance to the cost centres of a common service organisation that supply a product or service. Internal clients' cost centres that utilise the items and services are then given the relevant expenditure.
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