The Cost of the Personnel Department at the Speedy Process

question 88

Essay

The cost of the personnel department at the Speedy Process Company has always been charged to the production departments based upon number of employees. Recently, opinions gathered from the department managers indicated that the number of new hires might also be a predictor of personnel costs to be assigned. Total personnel department costs are $200.000.

Required:
Using the above data, prepare a report that contrasts the different amounts of personnel department cost that would be allocated to each of the production departments if the cost driver used is:
a.number of employees.
b.the number of new hires.
c.Which cost estimation method is being used by Speedy Company?

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Definitions:

FIFO

A cost flow assumption for inventory and financial accounting where the first goods purchased or produced are the first to be sold.

FIFO Inventory

An inventory costing method that assumes the items purchased or produced first are sold first, thereby remaining inventory consists of items added most recently.

Cash Transactions

Financial transactions involving the immediate payment of cash for the purchase of goods or services.