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 $350,000. Data for the fiscal year just ended show the following: Number of employees Detroit 380 Los Angeles 120 Number of new hires 7 Number of employees departing 3 20 10 Required: a. Compute the cost allocated to each unit using the current allocation system. b. The manager of the Detroit office belleves that Detroit gets little benefit from the personnel office other than the occasional hir and termination help. The manager asks the controller's office to estimate the amount of Personnel Department cost associate 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 Person Department for routine matters is $200,000 and the cost of the Personnel Department for transitions (each hire and each depa counts as one transition) is $150,000. 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
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 $350,000. Data for the fiscal year just ended show the following: Number of employees Detroit 380 Los Angeles 120 Number of new hires 7 Number of employees departing 3 20 10 Required: a. Compute the cost allocated to each unit using the current allocation system. b. The manager of the Detroit office belleves that Detroit gets little benefit from the personnel office other than the occasional hir and termination help. The manager asks the controller's office to estimate the amount of Personnel Department cost associate 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 Person Department for routine matters is $200,000 and the cost of the Personnel Department for transitions (each hire and each depa counts as one transition) is $150,000. 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Munabhai
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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 $350,000. Data for the fiscal year just ended show the following:
Number of employees
Detroit
380
Los Angeles
120
Number of new hires
7
20
Number of employees departing
3
10
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 $200,000 and the cost of the Personnel Department for transitions (each hire and each departure
counts as one transition) is $150,000.
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbab9417f-47cf-4a42-a804-8543d5c7d1f5%2Ffa132a27-38d9-4746-a9ba-1977c2d8a012%2Ftcj5e3n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:!
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 $350,000. Data for the fiscal year just ended show the following:
Number of employees
Detroit
380
Los Angeles
120
Number of new hires
7
20
Number of employees departing
3
10
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 $200,000 and the cost of the Personnel Department for transitions (each hire and each departure
counts as one transition) is $150,000.
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
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