Nashville Corporation allocates administrative costs on the basis of staff hours. Short-run monthly usage and long-run monthly usage of staff hours for Operating Departments 1 and 2 follow:
Dept. 1 Dept. 2 Total
Short-run usage (hours) 45,000 55,000 100,000
Long-usage (hours) 48,000 52,000 100,000
The annual cost of the corporate headquarters is $1,000.000. Required:
a) Allocate the corporate headquarters cost to the two operating departments using short -run usage in each operating department.
b) Allocate the corporate headquarters cost to the two operating departments using long -run usage in each operating department.