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2) Broadway Department Store allocates the personnel and payroll department costs to the sales departments of...

2) Broadway Department Store allocates the personnel and payroll department costs to the sales departments of Shoes, Automotive, and Clothing. Human resources (personnel) and payroll also provide services to each other. Personnel costs are allocated by number of employees and payroll costs are allocated by gross payroll. Costs and other information for January were as follows:

Personnel

Payroll

Shoes

Automotive

Clothing

Current Costs

$ 13,800

$ 6,400

$ 24,400

$ 40,000

$ 31,500

Gross Payroll

$ 3,000

$ 1,500

$ 5,600

$ 8,700

$ 4,050

Number of Employees

5

3

8

15

4

Required:

Prepare a schedule that includes the total cost of operating the sales departments for January. Allocate service costs using the step-down method with the sequence of allocation based on highest percentage support concept.

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Answer #1
Service Departments Producing Departments
Payroll Personnel Housewares Clothing Furniture
Total costs $ 0 0 $30,434 $50,774 $116,100
Service Departments Producing Departments
Payroll Personnel Housewares Clothing Furniture Total
Direct department cost $ $6,400 $13,800 $24,400 $40,000 $31,500 $116,100
Allocation of Payroll department costs -$6,400 $899 $1,679 $2,608 $1,214 $0
$0 $14,699 $26,079 $42,608 $32,714 $116,100
Allocation of Personnel department costs -$14,699 $4,355 $8,166 $2,178 $0
Total producing department costs $ $0 $0 $30,434 $50,774 $34,892 $116,100
Allocation of Payroll department costs in the ratio of gross payroll 3000 : 5600: 8700 : 4050. Total 21350
Allocation of Personnel department costs in the ratio of number of employees 8 : 15 : 4. Total 27
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