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Exeter Group is a large retall company that has brick$-$and$-$mortar outlets throughout the Southeast. They have been in business for

many years, but two years ago started an online sales channel to offset slowing in$-$store sales. The human resources $($HR$)$ department

at Exeter handles tasks for the two divisions that make up Exeter. Retall and Oniline. Retall Division manages the company's traditional

business line. This business, although still profitable, is currently not growing and may be shrinking silightly. Oniline Division, on the

other hand, has experlenced double$-$digit growth from the beginning.

The cost allocation system at Exeter allocates all corporate costs to the divisions based on a variety of cost allocation bases. HR costs

are allocated based on the average number of employees in the two divisions.

There are two basic activities in the HR Department. The first is employee maintenance $($payroll administration, benefits, and so on$),$

which is an ongoing activity and requires the same amount of work for each employee regardless of the employee's salary. The

second, called turnover, handles new and departing employees, including all records and orientations $($for new employees$)$ and

assurance of procedural integrity $($for all departures$).$ Virtually all of this activity occurs when employees are hired or leave the

company.

Assorted data for Exeter for the most recent year follow:

Required:

a$.$ Under the current allocation system, what are the costs that will be allocated from HR to Retall Division? To Oniline Division?

b$.$ Suppose the company implements an activity$-$based cost system for HR with the two activitles, employee maintenance and

turnover. Use the average number of employees as the cost driver for employee maintenance costs and the average number of

employees hired or leaving for turnover costs. What are the costs that will be allocated from HR to Retail? To Online?

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Suppose the company implements an activity$-$based cost system for HR with the two activities, employee maintenance and

turnover. Use the average number of employees as the cost driver for employee maintenance costs and the average number

of employees hired or leaving for turnover costs. What are the costs that will be allocated from HR to Retail? To Online?

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