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The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $300 per employee. Data for the fiscal year just ended show the following. Number of employees Number of new hires Number of employees departing 1,900 35 15 Miami New York 600 100 50 Required: a. Compute the cost allocated to each unit using the current allocation system. b. Livan, the manager of the Miami unit, is unhappy with the allocation from Personnel. He believes that he gets little benefit other than the occasional hire and termination help. He 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 rates would be $80 per employee for routine matters and $2,750 for each transition (each hiring and each departure counts as one transition). Recompute the costs allocated to each unit using the separate rates for routine and transitional matters. Total Allocated Cost Miami New York a. Using current allocation system b. Using separate rates

The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $300 per employee. Data for the fiscal year just ended show the following. Number of employees Number of new hires Number of employees departing 1,900 35 15 Miami New York 600 100 50 Required: a. Compute the cost allocated to each unit using the current allocation system. b. Livan, the manager of the Miami unit, is unhappy with the allocation from Personnel. He believes that he gets little benefit other than the occasional hire and termination help. He 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 rates would be $80 per employee for routine matters and $2,750 for each transition (each hiring and each departure counts as one transition). Recompute the costs allocated to each unit using the separate rates for routine and transitional matters. Total Allocated Cost Miami New York a. Using current allocation system b. Using separate rates

FINANCIAL ACCOUNTING
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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The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $300 per employee. Data for the fiscal year just ended show the following. Miami New York 600 Number of employees 1,900 35 Number of new hires 100 50 Number of employees departing 15 Required: a. Compute the cost allocated to each unit using the current allocation system. b. Livan, the manager of the Miami unit, is unhappy with the allocation from Personnel. He believes that he gets little benefit other than the occasional hire and termination help. He 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 rates would be $80 per employee for routine matters and $2,750 for each transition (each hiring and each departure counts as one transition). Recompute the costs allocated to each unit using the separate rates for routine and transitional matters. Total Allocated Cost Miami New York а. Using current allocation system b. Using separate rates
Transcribed Image Text:The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $300 per employee. Data for the fiscal year just ended show the following. Miami New York 600 Number of employees 1,900 35 Number of new hires 100 50 Number of employees departing 15 Required: a. Compute the cost allocated to each unit using the current allocation system. b. Livan, the manager of the Miami unit, is unhappy with the allocation from Personnel. He believes that he gets little benefit other than the occasional hire and termination help. He 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 rates would be $80 per employee for routine matters and $2,750 for each transition (each hiring and each departure counts as one transition). Recompute the costs allocated to each unit using the separate rates for routine and transitional matters. Total Allocated Cost Miami New York а. Using current allocation system b. Using separate rates
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