Question 1

Catoire Consultancy uses the direct method to allocate its service department costs to its operating departments. The company has two service departments, Information Technology and Administration, and two operating departments, Corporate Practice and Government Practice. Data concerning those departments follow:  Information Technology Department costs are allocated on the basis of computers and Administration Department costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.

Accepted Answer

Allocation base for Information Technology costs = 57 + 39 = 96
Allocation base for Administration costs = 113 + 36 = 149

Question 2

Gustavson 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:

Accepted Answer

A)  $337,530
B)  $331,090
C)  $340,240
D)  $340,426 C

Question 3

A company has several service departments that provide differing amounts of service to each other and to the company's operating departments. Which of the following statements is true?

Accepted Answer

A)  The direct method and the step-down method will result in the same amount of cost being allocated to each operating department.
B)  The direct method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
C)  The step-down method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
D)  The direct method is more accurate than the step-down method when service departments provide services to each other. B

Question 4

In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Law Department is closest to:

Accepted Answer

A)  $36,543
B)  $32,702
C)  $66,819
D)  $33,925

Question 5

Costs in the Personnel Department total $900,000 per year. Under the step-down method, the costs of the Personnel Department are allocated before the costs of the Engineering Department are allocated. The amount of this cost allocated to the Engineering Department under the step-down method is closest to:

Accepted Answer

A)  $0
B)  $81,000
C)  $83,505
D)  $92,046

Question 6

Assume Millard allocates service department costs by the direct method. After all allocations, the total amount of overhead costs in Operating Department 1 will be:

Accepted Answer

A)  $155,000
B)  $191,000
C)  $157,100
D)  $176,000

Question 7

Assume that the company uses the step-down method of allocation with Custodial Services allocated first. The amount of cost allocated from the Cafeteria to Custodial Services would be:

Accepted Answer

A)  $0
B)  $1,652
C)  $1,400
D)  $1,514

Question 8

The total amount of Administrative Department cost allocated to the Adult Medicine Department is closest to:

Accepted Answer

A)  $31,019
B)  $20,520
C)  $21,600
D)  $18,240

Question 9

Assume Millard allocates service department costs by the step-down method with Service Department A allocated first. After all allocations, the total amount of overhead cost in Operating Department 2 will be closest to:

Accepted Answer

A)  $128,000
B)  $127,000
C)  $154,143
D)  $102,833

Question 10

The total amount of Administrative Department cost allocated to the Assembly Department is closest to:

Accepted Answer

A)  $22,598
B)  $22,838
C)  $24,360
D)  $24,039

Question 11

The direct method is used by Adamski 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:

Accepted Answer

A)  $459,351
B)  $455,856
C)  $450,938
D)  $461,782

Question 12

The total Surgery Department cost after service department allocations is closest to:

Accepted Answer

A)  $540,968
B)  $539,348
C)  $535,993
D)  $532,067

Question 13

Suppose the company uses the step-down method and Personnel Department costs are allocated first. The amount of this cost allocated to the Engineering Department would be:

Accepted Answer

A)  $70,560
B)  $0
C)  $72,000
D)  $78,400

Question 14

Flinders Company has two service departments, Factory Administration and Maintenance, and two operating departments. Selected information relating to these departments is given below:  The company allocates service department costs by the step-down method. Costs of Factory Administration are allocated first on the basis of number of employees, and then costs of Maintenance are allocated on the basis of total labor hours.
Required:
Prepare a schedule showing the allocation of service department costs to other departments.

Accepted Answer

The answer of Flinders Company has two service departments, Factory...

Question 15

The total Geriatric Medicine Department cost after allocations is closest to:

Accepted Answer

A)  $338,117
B)  $338,676
C)  $328,768
D)  $292,616

Question 16

The amount of Personnel Department cost that would be allocated to Producing Department 2 under the direct method is closest to:

Accepted Answer

A)  $0
B)  $261,000
C)  $269,072
D)  $296,591

Question 17

Snopek 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.

Accepted Answer

The answer of Snopek Corporation uses the step-down method to...

Question 18

Assume that the company uses the direct method of allocation. The amount of Custodial Services cost allocated to the Cutting Department would be:

Accepted Answer

A)  $0
B)  $20,160
C)  $22,400
D)  $19,200

Question 19

Beames Emergency Care Hospital uses the step-down method to allocate service department costs to operating departments. The hospital has two service departments, Administration and Information Technology (IT), and two operating departments, Emergency Room and Intensive Care.  Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Accepted Answer

The answer of Beames Emergency Care Hospital uses the step-down...

Question 20

Prophit 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 Pediatrics. 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 Pediatrics Department cost after allocations is closest to:

Accepted Answer

A)  $231,638
B)  $223,132
C)  $232,286
D)  $182,936

Exam 9: Service Department Allocations