Denver Company’s human resources department provides
training and other services to the company’s three operating departments and to
one service department. The assembly department has 82 employees; the finishing
department has 16 employees; and the sales department has 9 employees. The
service department to which human resources provides services is the
maintenance department, which has 13 employees. The human resources department costs
are allocated using the direct method and based on the number of employees, and
the total amount of costs for the department is $187,000.
Required
Determine the amount of human resources cost that should be
allocated to each department.
Foster Electronics currently produces the shipping
containers it uses to deliver the electronics products it sells. The monthly
cost of producing 9,000 containers follows:
Unit-level materials $9,000
Unit-label labor 12,000
Unit-level overhead 7,800
Product level costs 18,000
Allocated facility-level costs 45,000
* One third of these cots could be avoided by purchasing the
containers.
Piazza Container Company has offered to sell comparable
containers to Foster for $ 4.50 each.
Required
Should Foster continue to make the containers? Support your
answer with appropriate computations.
