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 c. Assuming that the benefits-provided ranking is the order shown in the table, use the step method to allocate the support department costs to the revenue-generating departments. Note: Round your final answers only to the nearest whole dollar. Amount allocated to Advertising: 1094100 Amount allocated to Circulation: $Answer
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 |
c. Assuming that the benefits-provided ranking is the order shown in the table, use the step method to allocate the support department costs to the revenue-generating departments.
Note: Round your final answers only to the nearest whole dollar.
Amount allocated to Advertising: 1094100
Amount allocated to Circulation: $Answer
A direct cost is indeed a price that is directly related to the production of a particular good or service. A direct cost is associated with a cost object, which can be a service, a product, or a department. Direct and indirect costs are the two major types of expenses or costs that business owners can incur. Direct costs are frequently variable costs, which means that they fluctuate with production levels, such as inventory. However, some costs, such as hidden costs, are more difficult to assign to a specific product. Indirect costs include depreciation and administrative expenses. Direct costs are typically variable, but they can also be fixed.
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