Tilden Financial Services has two divisions, Financial Planning and Business Consulting. The firm's accountants are in the process of selecting an allocation base to allocate centrally provided personnel costs to the divisions. Two allocation bases have been proposed: salary and headcount (number of employees). Personnel costs are expected to be Si, 500,000.The following data relate to the allocation:
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Required:
a. Prepare a schedule showing the allocations to the two divisions using each allocation base.
b. Referring to your answer to part a, explain why allocations are sometimes considered arbitrary.