Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service department costs for the latest period follows: Number of IS service tickets Number of employees Square footage occupied IS 165 150 Personnel Administration Residential Commercial 195 1,410 940 110 3,900 115 102 8,000 3,800 138 16,100 162 69,500 The costs of the service departments and the allocation basis for each department follow. Department Information Systems (IS) Personnel Administration Direct Cost $ 32,000 39,000 35,700 Allocation Base IS service tickets Employees Square footage occupied Required: a. Assume that the company allocates service department costs to production departments using the direct method. What amount of Information Systems (IS) Department costs will be allocated to the Commercial Department? b. Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department? c. Assuming that the company allocates service department costs to other departments using the step method (starting with Administration and then IS), what amount of Administration Department costs is allocated to the IS Department? d. Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration?
Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service department costs for the latest period follows: Number of IS service tickets Number of employees Square footage occupied IS 165 150 Personnel Administration Residential Commercial 195 1,410 940 110 3,900 115 102 8,000 3,800 138 16,100 162 69,500 The costs of the service departments and the allocation basis for each department follow. Department Information Systems (IS) Personnel Administration Direct Cost $ 32,000 39,000 35,700 Allocation Base IS service tickets Employees Square footage occupied Required: a. Assume that the company allocates service department costs to production departments using the direct method. What amount of Information Systems (IS) Department costs will be allocated to the Commercial Department? b. Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department? c. Assuming that the company allocates service department costs to other departments using the step method (starting with Administration and then IS), what amount of Administration Department costs is allocated to the IS Department? d. Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating
departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service
department costs for the latest period follows:
Number of IS service tickets
Number of employees
Square footage occupied
IS
165
150
Personnel Administration Residential Commercial
195
1,410
940
110
3,900
115
102
8,000
3,800
138
16,100
162
69,500
The costs of the service departments and the allocation basis for each department follow.
Department
Information Systems (IS)
Personnel
Administration
Direct Cost
$ 32,000
39,000
35,700
Allocation Base
IS service tickets
Employees
Square footage occupied
Required:
a. Assume that the company allocates service department costs to production departments using the direct method. What amount of
Information Systems (IS) Department costs will be allocated to the Commercial Department?
b. Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the
Residential Department?
c. Assuming that the company allocates service department costs to other departments using the step method (starting with
Administration and then IS), what amount of Administration Department costs is allocated to the IS Department?
d. Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration?
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