Question 1 Booth Financial Services, LLC has two revenue producing departments, Financial Planning and Business Consulting. The accounting department is trying to determine the best method to allocate $1,000,000 of common costs (secretarial staff, reception personnel, etc), either by salary or number of employees. Information on the revenue departments are as follows: Department Employees Salaries Financial Planning 150 employees $10,000,000 Business Consulting 50 employees $5,000,000 (a) Allocate the $1,000,000 common costs to the two revenue departments using both methods. (b) Why are allocations called arbitrary?
Question 2 Gina’s Boutique makes custom jewelry. One item, the guru necklace, is a best seller and sales in units for the first quarter are as follows: January 100,000 units February 150,000 units March 180,000 units Desired ending inventory is budgeted at 20% of next month sales. Compute production for February.