| 2.||Question :||(TCO 6) 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:|
|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?