### Departmental Cost AllocationIn a company with different departments, accurately allocating costs is essential for financial management. This example demonstrates how to allocate costs among various departments using personnel and technology costs.#### Departments OverviewThe organization is divided into:- Two service departments: **Personnel** and **Information Technology (IT)**- Two operating departments: **Family Medicine** and **Pediatrics**The data concerning these departments are as follows:| | Service Departments | Operating Departments | |--------------------------|---------------------------|-----------------------|| | Information Technology | Family Medicine | Pediatrics ||--------------------------|---------------------------|-----------------------|---------------------|| **Departmental Costs** | $86,184 | $45,995 | $608,130 | $316,290 || **Employees** | 18 | 26 | 128 | 188 || **Personnel Costs** | 19 | 26 | 125 | 156 |#### Cost AllocationPersonnel costs are allocated first based on the number of employees. Next, Information Technology costs are allocated based on personnel costs.#### QuestionGiven the following data, calculate the total Pediatric Department cost after allocations are applied. The total Pediatrics Department cost after allocations is closest to:#### Multiple Choice- $345,462- $393,099- $392,838- $383,307By applying standard cost allocation methods, you can determine the total cost attributed to the Pediatrics Department. This exercise helps understand the impact of indirect costs on operational departments.___**Note:** The table displays the departmental summary, including individual costs and personnel numbers. Allocation of costs is done in a systematic manner, starting with personnel costs followed by IT costs, reflecting an accounting approach to distributing overheads.### Learning Points:1. **Understanding Cost Allocation:** A segmented view of departmental costs and the criteria for allocating them.2. **Systematic Allocation Process:** Step-by-step approach to apply cost allocation, emphasizing structured methods.3. **Impact Analysis:** Discover how overhead costs impact different operational sectors, reinforcing the need for accurate financial tracking.### Recommended Exercises:1. **Practice Allocation:** Use similar datasets to practice cost allocations.2. **Scenario Analysis:** Explore the changes in total costs with different allocation bases.3. **Software Tools:** Learn to use financial software that automates the allocation of costs

The method of apportioning and allocating the overheads to various departments are called as…

Technology (IT), and two operating departments, Family Medicine and Pediatrics. Data concerning those departments follow: Service Departments Information Technology $ 45,995 Operating Department Family Personnel Medicine Pediatrics $ 86,184 $ 608,130 $ 316, 290 Departmental costs Employees Personnel costs 18 26 128 188 19 26 125 156 Personnel costs are allocated first on the basis of employees and Information Technology costs are allocated second on the basis of Personnel costs. The total Pediatrics Department cost after allocations is closest to: Multiple Choice $345,462 $393,099 $392,838 $383,307

Technology (IT), and two operating departments, Family Medicine and Pediatrics. Data concerning those departments follow: Service Departments Information Technology $ 45,995 Operating Department Family Personnel Medicine Pediatrics $ 86,184 $ 608,130 $ 316, 290 Departmental costs Employees Personnel costs 18 26 128 188 19 26 125 156 Personnel costs are allocated first on the basis of employees and Information Technology costs are allocated second on the basis of Personnel costs. The total Pediatrics Department cost after allocations is closest to: Multiple Choice $345,462 $393,099 $392,838 $383,307

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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