Exam 23: Service Department Allocations

Finkler Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. -In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Law Department is closest to:

The direct method is used by Hoeffner Publishing, Inc., to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Prepress and Printing. Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total Prepress Department cost after service department allocations is closest to:

The direct method has the disadvantage that it may leave some service department costs unallocated.

The Mohawk-Hudson Company is an electric utility which has two service departments, Accounting and Maintenance. It has two operating departments, Generation and Transmission. The company does not distinguish between fixed and variable service department costs. Maintenance Department costs are allocated on the basis of maintenance hours. Accounting Department costs are allocated to operating departments on the basis of accounting hours of service provided. Budgeted costs and other data for the coming year are as follows: The step-down method is used to allocate service department costs, with the accounting department being allocated first. -The amount of Maintenance Department cost allocated to the Accounting Department would be:

The James Company has four departments with data as follows: -Maintenance Department costs are allocated on the basis of labor hours. The amount of cost allocated to Milling from Maintenance under the direct method would be:

Holmon Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Information Technology and Administration, and two operating departments, Surgery and Recovery. Information Technology Department costs are allocated on the basis of computer workstations and Administration Department costs are allocated on the basis of employees. -The total amount of Information Technology Department cost allocated to the two operating departments is closest to:

Quezaire Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow: Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied. -In the first step of the allocation, the amount of Administration Department cost allocated to the Assembly Department is closest to:

When would the direct method and the step-down method of service department cost allocation result in identical allocations being made to the operating departments?

If personnel department expenses are allocated on the basis of the number of employees in various departments, then the number of employees in the personnel department itself must be included in the allocation base when the step-down method is used.

Weisenborn Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Fabrication and Customization. Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. -The total amount of Information Technology Department cost allocated to the two operating departments is closest to:

Finkler Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. -Hodgin Corporation uses the direct method to allocate its two service department costs to its two operating departments. Data concerning those departments follow: B. Required: Allocate the service department costs to the operating departments using the direct method. Service Department A costs are allocated on the basis of allocation base A and Service Department B costs are allocated on the basis of allocation base

Ranft Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Pediatric. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. The total Pediatric Department cost after allocations is closest to:

The Mohawk-Hudson Company is an electric utility which has two service departments, Accounting and Maintenance. It has two operating departments, Generation and Transmission. The company does not distinguish between fixed and variable service department costs. Maintenance Department costs are allocated on the basis of maintenance hours. Accounting Department costs are allocated to operating departments on the basis of accounting hours of service provided. Budgeted costs and other data for the coming year are as follows: The step-down method is used to allocate service department costs, with the accounting department being allocated first. -The amount of accounting department costs allocated to the Maintenance Department would be:

Taketa Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Administration Department costs are allocated first on the basis of employee time and Facilities Department costs are allocated second on the basis of space occupied. Required: Allocate the service department costs to the operating departments using the step-down method.

Wisneski Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, General Management and Physical Plant, and two operating departments, Sales and After-Sales. Data concerning those departments follow: General Management Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total After-Sales Department cost after allocations is closest to:

Zoopsia Hospital has two service departments and three operating departments. Selected information on the five departments for last year is as follows: Zoopsia allocates Power Generation cost first on the basis of kilowatt hours. Zoopsia then allocates Laundry cost on the basis of the number of employees. Operating costs in Power Generation for last year were $250,000. Operating costs in Laundry for last year were $60,000. No distinction is made between variable and fixed costs. -If service department costs are allocated using the direct method, what is the total amount of service cost that would be allocated to the Emergency Room?

Letter Corporation has two service departments (A and B) that provide service to each other and to two operating departments (X and Y). A provides 20% of its service to B, 30% of its service to X, and 50% of its service to Y. B provides 10% of its service to A, 45% of its service to X, and 45% of its service to Y. Operating costs in A are $300,000. Operating costs in B are $180,000. Cost allocations are made starting with department A. No distinction is made between variable and fixed costs. -If service department costs are allocated using the direct method, what is the total amount of service cost that will be allocated to X?

Nolin Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Wholesaling. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied. The total Wholesaling Department cost after the allocations of service department costs is closest to:

Finkler Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. -The total Corporate Law Department cost after allocations is closest to:

Clopton Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Geriatric Medicine. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. -In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Medicine Department is closest to: