Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman

Exercise 14

Barry?s Fashions
Barry's Fashions operates a Downtown Store and a Mall Store. Both department stores use three centralized, corporate service departments (human resources, maintenance, and information management). The following table summarizes the allocation bases used to allocate each service department, the operating expenses incurred by each service department, and the amount of each allocation base used by the three service departments and the two stores.
Required: (Round all fractions to three significant digits.)
a. Using the direct allocation method for allocating service department costs, calculate the amount of information management expense allocated to the Mall Store.
b. Using the direct allocation method for allocating service department costs, calculate the allocated cost per line printed for information management services.
c. Using the step-down allocation method for allocating service department costs, calculate the amount of information management expense allocated to the Mall Store. Note that the order of the service departments is as indicated in the table.
d. Using the step-down allocation method for allocating service department costs, calculate the allocated cost per line printed for information management services. Note that the order of the service departments is as indicated in the table.
e. Compare and contrast your answers in parts ( b ) and ( d ). First, describe why you get different answers. Second, which number would you recommend management use?