Sullivan and Hodge Groundskeeping Inc. uses a centralized payroll department to support its 3 divisions. It incurs $60,000 per year to run this department and allocates the cost based on the number of employees in each division. The detail is as follows: Division Number of Employees Residential Services 75 Commercial Services 105 Seasonal Cleanup 60 Total 240 How much of the $60,000 should be allocated to each division?

Sullivan and Hodge Groundskeeping Inc. uses a centralized payroll department to support its 3 divisions. It incurs $60,000 per year to run this department and allocates the cost based on the number of employees in each division. The detail is as follows: Division Number of Employees Residential Services 75 Commercial Services 105 Seasonal Cleanup 60 Total 240 How much of the $60,000 should be allocated to each division?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $223,800. An internally prepared report summarizes the Payroll Department's annual operating costs as follows: Supplies Payroll clerks' salaries Payroll supervisor's salary Payroll employee training expenses Depreciation of equipment Allocated share of common building operating costs Allocated share of common administrative overhead Total annual operating cost $ 33,800 123,800 61,800 13,800 23,800 18,800 31,800 $ 307,600 EDC currently rents overflow office space for $39,800 per year. If the company closes its Payroll Department, the employees occupying the rented office space could be brought in-house and the lease agreement on the rented space could be terminated with no penalty. If the Payroll Department is outsourced the payroll clerks will not be retained; however, the supervisor would be transferred to the company's Human Resource Management…
The costs will be allocated based on the number of employees using the direct method.