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24 December, 04:32

Exercise 4-2A Allocating costs between divisions Beasley Services Company (BSC) has 50 employees, 28 of whom are assigned to Division A and 22 to Division B. BSC incurred $450,000 of fringe benefits cost during 2018 Required Determine the amount of the fringe benefits cost to be allocated to Division A and to Division B

4-2. Step 1. Determine the allocation rate: Allocation rate = TL cost to be allocated / Cost driver Allocation rate = Step 2. Assign the cost by multiplying the allocation rate by the weight of the base (cost driver) for each division Division Allocation Rate x Weight of Base Allocated Cost Total allocated cost

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  1. 24 December, 07:49
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    (a) $9,000 per employee

    (b) $252,000; $198,000

    Explanation:

    Given that,

    Fringe benefits cost during 2018 = $450,000

    Employees assigned to division A = 28

    Employees assigned to division B = 22

    (a) Allocation rate:

    = Total cost to be allocated : Cost driver

    = $450,000 : 50

    = $9,000 per employee

    (b) Cost assigned to A:

    = Division Allocation Rate * Weight of base (No. of employees)

    = $9,000 * 28

    = $252,000

    Cost assigned to B:

    = Division Allocation Rate * Weight of base (No. of employees)

    = $9,000 * 22

    = $198,000
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