Question

Jane Cooper's Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, Housewares, Clothing, and Furniture. In addition to providing services to the operating departments, Personnel and Payroll provide services to each other. Copper's allocates Personnel Department costs on the basis of gross payroll. Cost and allocation information for June is as follows:

Personnel Payroll Housewares Clothing Furniture
Direct department cost $15,600 $6,400 $24,400 $40,000 $33,500
Number of employees 15 12 24 32 12
Gross payroll $12,000 $6,600 $21,200 $26,100 $16,200
A) Determine the percentage of total Personnel Department services that was provided to the Payroll Department
B) Determine the percentage of total Payroll Department services that was provided to the Personnel Department.
C) Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming Cooper's uses the step method.

Answer 1

Jane Cooper's Department Stores

A) The percentage of total Personnel Department services provided to the Payroll Department is:

= 7.45%

b) The percentage of total Payroll Department services provided to the Personnel Department is:

= 14.33%

C) A Schedule showing Personnel Department and Payroll Department Cost Allocations to the operating departments, using the step method:

Allocation of service departments' costs:

Service Departments Retail Sales Departments

Personnel Payroll Housewares Clothing Furniture

Direct department cost $15,600 $6,400 $24,400 $40,000 $33,500

Number of employees 15 12 24 32 12

Gross payroll $12,000 $6,600 $21,200 $26,100 $16,200

Total costs $27,000 $13,000 $45,600 $66,100 $49,700

Personnel costs -27,000 2,013 7,060 10,233 7,694

Total costs remaining 0 15,013 $52,660 $76,333 $57,394

Payroll costs -15,013 4,242 6,148 4,623

Total costs after allocation of service costs $56,902 $82,481 $62,017

Step-by-step explanation:

a) Data and Calculations:

Cost Allocation

Service Departments Retail Sales Departments

Personnel Payroll Housewares Clothing Furniture

Direct department cost $15,600 $6,400 $24,400 $40,000 $33,500

Number of employees 15 12 24 32 12

Gross payroll $12,000 $6,600 $21,200 $26,100 $16,200

Personnel costs:

Payroll = $13,000/$174,400 * $27,000 = $2,013

Housewares = $45,600/$174,400 * $27,000 = $7,060

Clothing = $66,100/$174,400 * $27,000 = $10,233

Furniture = $49,700 /$174,400 * $27,000 = $7,694

Payroll costs:

Housewares = $52,660/$186,387 * $15,013 = $4,242

Clothing = $76,333/$186,387 * $15,013 = $6,148

Furniture = $57,394/$186,387 * $15,013 = $4,623

Total Personnel Department services provided to the Payroll Department:

= $2,013/$27,000 * 100 = 7.45%

= $13,000/$174,400 * 100 = 7.45%

Total Payroll Department services provided to the Personnel Department:

= $27,000/$188,400 * 100 = 14.33%