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:

Evolutionary

Pertains to the gradual process of biological change and development over successive generations.

Extraversion

A personality trait characterized by high levels of enthusiasm, energy, sociability, talkativeness, and assertiveness.

Personality Variance

Differences in characteristics and behavioral patterns among individuals, often used to understand individuality.

Twin Studies

Research that compares the similarities and differences between monozygotic (identical) and dizygotic (fraternal) twins to understand how genetics and environment influence traits.