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Exam 23: Service Department Allocations

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Question 21

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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 step-down method, what is the total amount of service cost that will be allocated to Y?

A) $231,000
B) $240,000
C) $258,000
D) $270,000

E) B) and D)
F) All of the above

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Question 22

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In both the direct and step-down methods of allocating service department costs, any amount of the allocation base that is attributable to the service department whose cost is being allocated is ignored.

A) True
B) False

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Question 23

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Wiedenheft Children's Clinic allocates service department costs to operating departments using the step-down method. The clinic has two service departments, Administration and Information Technology (IT) , and two operating departments, Prenatal and Pediatric. Data concerning those departments follow: Administration 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:

Hypes Clinic uses the direct method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Support, and two operating departments, Prenatal and Pediatrics. Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics Department cost after the allocations of service department costs is closest to:

Costillo Corporation has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. The company uses the step-down method to allocate service department costs to operating departments. Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B. Required: Allocate the service department costs to the operating departments using the step-down method.

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 direct method is used by Rastorfer Clinic to allocate its service department costs to its operating departments. Data concerning those departments follow: Information Technology costs are allocated on the basis of computers and Personnel costs are allocated on the basis of employees. Required: Allocate the service department costs to the operating departments using the direct method.

The step-down method requires that an order of allocation is established before service department costs can be allocated to operating departments.

Silguero Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics. The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. -The total Pediatrics Department cost after the allocations of service department costs is closest to:

Silguero Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics. The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. -The total amount of Administrative Department cost allocated to the Adult Medicine Department is closest to:

Reciprocal service department costs are:

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

Hopp Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Data Processing and Personnel, and two operating departments, Assembly and Finishing. Data Processing 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 Data Processing 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. -Maclennan 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 Finishing. Administrative Department costs are allocated on the basis of employee hours and Facilities Department costs are allocated on the basis of space occupied. Required: Allocate the service department costs to the operating departments using the direct method.

Lisby, Inc., allocates service department costs to operating departments using the step-down method. The company has two service departments, Administration and Physical Plant, and two operating departments, Assembly and Testing. Data concerning those departments follow: Administration 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 Testing Department cost after allocations is closest to:

Karnofski Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. Data concerning those departments follow: Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B. -In the first step of the allocation, the amount of Service Department A cost allocated to the Operating Department X is closest to:

Aderholt 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.

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 Generation Department would be:

Parker Company has two service departments, cafeteria and engineering, and two operating departments. The number of employees in each department is given below: The costs of the Cafeteria are allocated to other departments on the basis of the number of employees in the departments. If these costs are budgeted at $69,375, the amount of cost allocated to Engineering under the direct method would be:

The James Company has four departments with data as follows: -Cafeteria costs are allocated on the basis of number of employees. If the step-down method is used with costs of the Cafeteria allocated first, the amount of cost allocated from the Cafeteria to Maintenance would be:

Kormos Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Telecommunications and Administration, and two operating departments, Surgery and Recovery. Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees. The total Surgery Department cost after service department allocations is closest to: