Min Joon Appliances allocates the Human Resources and Information systems department costs to the sales departments...

Min Joon Appliances allocates the Human Resources and Information systems department costs to the sales departments of Refrigerators and Stoves. Human Resources and Information systems also provide services to each other. Human Resources costs are allocated by number of employees and Information systems costs are allocated by number of computer hours. Department costs, along with the number of employees that worked during May and information systems computer hours logged are provided below.

August Data	Human resources	Information systems	Refrigerators	Stoves
Actual costs	$14,100	$7,031	$22,300	$42,500
Budgeted costs	$13,800	$6,327	$24,400	$40,000
Computer hours	3,600	1,500	5,400	9,000
Number of employees	5	3	9	18

Required:

Allocate the costs of the service departments to the operating department. The resulting schedules will include the total cost of operating the Refrigerators and Stoves departments for May using the appropriate figures.

Apply this process using the following methods:

Allocate service department costs using the direct method.
Allocate service department costs using the reciprocal method. (5 marks

C.The owner, Min Joon would like your recommendation on whether they should use the Direct or Reciprocal method of support department cost allocation. Back up your recommendation with a discussion of the advantages and disadvantages of both methods and the reasons for your recommendation. Remember to use pertinent figures from your quantitative analysis.

Expert Solution

ekkarill92 answered 2 years ago

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