The Cost of the Personnel Department at the Miller Company

Essay

The cost of the personnel department at the Miller Company has always been charged to the production departments based upon number of employees. Recently, opinions gathered from the department managers indicated that the number of new hires might also be a predictor of personnel costs to be assigned. Total personnel department costs are $120,000.

Required:
Using the above data, prepare a report that contrasts the different amounts of personnel department cost that would be allocated to each of the production departments if the cost driver used is:
a. number of employees.
b. the number of new hires.
c. Which cost estimation method is being used by Miller Company?