Question

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

Answer 1

Answer:

(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