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: ISPersonnelAdministrationResidentialCommercialNumber of IS service tickets1301601151,410940Number of employees758067138162Square footage occupied3,9008,0003,80016,10069,500The costs of the service departments and the allocation basis for each department follow.DepartmentDirect CostAllocation BaseInformation Systems (IS)$ 25,000IS service ticketsPersonnel32,000EmployeesAdministration28,700Square footage occupiedRequired: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?Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department?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?Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration?

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Answered: Assume that the company allocates…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	IS	Personnel	Administration	Residential	Commercial
Number of IS service tickets	130	160	115	1,410	940
Number of employees	75	80	67	138	162
Square footage occupied	3,900	8,000	3,800	16,100	69,500

Department	Direct Cost	Allocation Base
Information Systems (IS)	$ 25,000	IS service tickets
Personnel	32,000	Employees
Administration	28,700	Square footage occupied

Required:

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?
Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department?
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?
Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration?

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