The City of Harris has two departments—Parks and Recreation (P&R) and Facility M
ID: 2592088 • Letter: T
Question
The City of Harris has two departments—Parks and Recreation (P&R) and Facility Maintenance (FM)—
that provide services to its citizens. P&R offers many programs in art, culture and athlectics, while the FM department maintains all the streets, buildings, and other public facilities. Behind the scenes, Harris has two departments that support the activities of the P&R and FM departments. The Human Resources department processes payroll and oversees all hiring, development, and training. The General Administration department provides IT support, overall coordination, and managerial support.
The table below provides data regarding the costs traced to and consumption of services by various activity pools/departments.
Service consumption pattern:
Questions:
7-1. Allocate the costs of HR and GA to the line departments using the direct method.
7-2. Compute the total costs in the cost pool for P&R and FM departments.
7-3. Using the step-down method to allocate the the costst of the two support departments to the line departments. Allocate HR first.
7-4. Using the step-down method to allocate the the costst of the two support departments to the line departments. Allocate GA first.
7-5. Why are these results different?
7-6. Use the reciprocal method to allocate the two support departments to the line departments.
7-7. Which method of the three gives the most accurate estimate of the cost of the support services consumed by P&R and FM departments?
HR GA P&R FM Traced Costs $100,000 $60,000 $360,000 $450,000Explanation / Answer
Per Chegg guidelines 4 sub-parts have been answered.
7-1 Support Departments Line Departments Direct Method HR GA P&R FM Total Traced costs before interdepartment cost allocations 100000 60000 360000 450000 970000 Allocation of HR costs -100000 50000 50000 Allocation of GA costs -60000 45000 15000 Total costs $ 0 0 455000 515000 970000 7-2 Total costs in cost pool: P&R Department: $455000 FM Department: $515000 7-3 Support Departments Line Departments Step-down method (Allocate HR first) HR GA P&R FM Total Traced costs before interdepartment cost allocations 100000 60000 360000 450000 970000 Allocation of HR costs -100000 40000 30000 30000 0 0 100000 390000 480000 970000 Allocation of GA costs 0 -100000 75000 25000 0 Total costs $ 0 0 465000 505000 970000 7-4 Support Departments Line Departments Step-down method (Allocate GA first) HR GA P&R FM Total Traced costs before interdepartment cost allocations 100000 60000 360000 450000 970000 Allocation of GA costs 12000 -60000 36000 12000 0 112000 0 396000 462000 970000 Allocation of HR costs -112000 0 56000 56000 0 Total costs $ 0 0 452000 518000 970000