Harmon Recycling Services HRS a notforprofit organization, has two dropoff centers, Westside and Eastside. The company is
considering using a twostage cost allocation system and wants to assess the effects on reported product profits.
More detailed financial information for HRS follows:
The company plans to use Clients to allocate userrelated costs and Staff Costs to allocate staffrelated costs.
An accounting student from the local college working on a related project at HRS as a part of a course, suggested a further revision
after an analysis of the general operating accounts. Specifically, the student suggested that the staffrelated costs should be separated
into two cost pools instead of one. One pool would be allocated based on staff hours and the other pool allocated based on staff
costs.
The general operating costs could be summarized as follows:
Required:
a Compute the predetermined overhead rate used to apply the three general operating cost pools to the two center Eastside and
Westside assuming HRS uses the the student's proposed twostage cost system to allocate general operating costs.
b Based on the rates computed in requirement a what is the surplus revenues minus costs for each service?
