Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Personnel Legal Eastern Western Employees - 40 120 40 Hours 10,800 - 5,400 1,800 Department direct costs $ 300,000 $ 160,000 $ 1,200,000 $ 790,000 Required: Allocate the cost of the service departments to the operating divisions using the direct method. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. Allocate the cost of the service departments to the operating divisions using the reciprocal method.
Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Personnel Legal Eastern Western Employees - 40 120 40 Hours 10,800 - 5,400 1,800 Department direct costs $ 300,000 $ 160,000 $ 1,200,000 $ 790,000 Required: Allocate the cost of the service departments to the operating divisions using the direct method. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. Allocate the cost of the service departments to the operating divisions using the reciprocal method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows:
| Personnel | Legal | Eastern | Western | |
|---|---|---|---|---|
| Employees | - | 40 | 120 | 40 |
| Hours | 10,800 | - | 5,400 | 1,800 |
| Department direct costs | $ 300,000 | $ 160,000 | $ 1,200,000 | $ 790,000 |
Required:
- Allocate the cost of the service departments to the operating divisions using the direct method.
- Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal.
- Allocate the cost of the service departments to the operating divisions using the reciprocal method.
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