A company has two operating departments: Retail Shops and Online Shop. Each of the operating departments uses the services of the company's two service departments: Admin and HR. Additionally, the Admin and HR departments use the services of each other. Data concerning the past year are as follows: Retail Online Admin HR Total Shops Shop Budgeted overhead costs before any interdepartment cost allocations Support work furnished: For Admin department $250,000 $190,000 S380,000 | S470,000 S1,290,000 Number of Admin tasks 90 290 120 For HR department No. of employees 21 62 17 Required (a) Compute the total overhead costs of the operating departments (Retail Shops and Online Shop) after the service department costs of Admin and HR have been allocated using (i) the direct method. (ii) the step-down method. (using the sequence of cost of service provided) (iii) the reciprocal method. (b) Which method would you recommend that the company use to allocate service department costs? Why? You should consider different perspectives.

A company has two operating departments: Retail Shops and Online Shop. Each of the operating departments uses the services of the company's two service departments: Admin and HR. Additionally, the Admin and HR departments use the services of each other. Data concerning the past year are as follows: Retail Online Admin HR Total Shops Shop Budgeted overhead costs before any interdepartment cost allocations Support work furnished: For Admin department $250,000 $190,000 S380,000 | S470,000 S1,290,000 Number of Admin tasks 90 290 120 For HR department No. of employees 21 62 17 Required (a) Compute the total overhead costs of the operating departments (Retail Shops and Online Shop) after the service department costs of Admin and HR have been allocated using (i) the direct method. (ii) the step-down method. (using the sequence of cost of service provided) (iii) the reciprocal method. (b) Which method would you recommend that the company use to allocate service department costs? Why? You should consider different perspectives.

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Description: A company has two operating departments: Retail Shops and Online Shop. Each of theoperating departments uses the services of the company's two service departments: Adminand HR. Additionally, the Admin and HR departments use the services of each othe

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 9E: A manufacturing company has two service and two production departments. Human Resources and Machine...

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