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?

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Definitions:

Potential Marriage Partner

An individual who is considered as a possible candidate for entering into a marital relationship.

Marriage Partner

An individual chosen to enter into a legally and/or socially recognized matrimonial relationship with another.

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An intense emotional state characterized by a powerful longing for union with another, often accompanied by physiological arousal.

Companionate Love

A form of love characterized by deep affection, friendship, and emotional intimacy, as opposed to passionate love or infatuation.