The Personnel Department Provides Service to Operating Departments a and B

question 24

Multiple Choice

The personnel department provides service to operating departments A and B. Personnel's budget is based on 250 employees (100 in department A and 150 in department B) . The budget calls for $40,000 in fixed costs, plus $140 per employee. During a recent month the personnel department incurred $41,000 in fixed costs and $42,200 in variable costs. The two operating departments, A and B, had 120 and 140 employees, respectively.
The CEO of the company described above wants to gather information for a decision to outsource the HR function. Which of the following allocation methods would provide useful information?

• A) A job costing system
• B) A dual-rate support department allocation system
• C) A single-rate support department allocation system
• D) A process costing system

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Definitions:

Compounded Semi-annually

Refers to the process where interest is calculated and added to the principal sum of a deposit or loan twice a year.

Compounded Monthly

A method of calculating interest where the accrued interest is added to the principal sum each month, so that each successive calculation includes interest on the interest.

RRSP

A Registered Retirement Savings Plan, which is a retirement savings and investing tool for employees and the self-employed in Canada.

Compounded Annually

Interest on an investment that is calculated once a year and added to the principal sum of the investment.