Castro Corporation Has One Service Department and Three Producing Departments

question 28

Essay

Castro Corporation has one service department and three producing departments. The budget for the following year allocates the service department costs to the producing departments based on the number of employees in each department. Currently, the budget for the service department is $2,400,000 and the number of employees in each department is as follows:
Department 1: 100
Department 2: 50
Department 3: 150
During the year, due to sudden expanded growth, Department 2 has to add 50 new employees; however the service department costs have not increased due to budget constraints.
Required:
(a) What were the expected service department allocations at the beginning of the year to each production department?
(b) What will be the actual allocations based on the number of employees each department has at year end?
(c) Comment on the reasonableness of the situation. What are the potential causes of any problems created by this allocation method?

---

Definitions:

Suprematism

A type of art formulated by Kazimir Malevich to convey his belief that the supreme reality in the world is pure feeling, which attaches to no object and thus calls for new, nonobjective forms in art—shapes not related to objects in the visible world.

Pure Feeling

An unalloyed emotional state that is undiluted by rational thought, often emphasized in discussions of art, music, and poetry to denote sincere or profound emotion.

Objective Reality

The concept that objects exist and have properties independent of any observer's beliefs or perceptions.

Nightingale

A small songbird known for its powerful and beautiful song, often associated with poetry and literature as a symbol of love and longing.