Mackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company’s human resources (HR) department. The annual costs of the HR department total $25,000,000 a year. You have the following selected information about the two divisions: Number of Employees Wage and Salary Expense ($000) Northern 2,915 $ 241,800 Southern 2,385 148,200 Required: What is the HR cost that is charged to each division if the number of employees is used as the allocation basis? What is the HR cost that is charged to each division if the wage and salary expense total is used as the allocation basis?
Mackenzie Mining has two operating divisions, Northern and Southern, that share the common costs of the company’s human resources (HR) department. The annual costs of the HR department total $25,000,000 a year. You have the following selected information about the two divisions:
| Number of Employees | Wage and Salary Expense ($000) | |
|---|---|---|
| Northern | 2,915 | $ 241,800 |
| Southern | 2,385 | 148,200 |
Required:
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What is the HR cost that is charged to each division if the number of employees is used as the allocation basis?
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What is the HR cost that is charged to each division if the wage and salary expense total is used as the allocation basis?
Answer:-
Cost allocation meaning:- Identification, accumulation and assignment of costs to certain cost objects is the process of cost allocation. An individual product or product line, a single service a company provide, an activity connected to production, or a division or department within business can all be considered cost objects.
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