Broadway Department Store Allocates the Personnel and Payroll Department Costs

question 142

Essay

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:
Required:
Prepare a schedule, which 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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Definitions:

Operating Expense

Costs associated with the day-to-day functions of a business, excluding direct production costs.

Yield

The income return on an investment, expressed as a percentage of the investment's cost.

Revenue Generated

The total amount of income produced by a company through its activities, typically from sales of products or services, before any expenses are subtracted.

Capacity Management

The practice of planning and controlling resources, such as production capacity or human efforts, to meet changing demands without incurring unacceptable delays or costs.