BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.       Administration Accounting   domestic     International   Employees   – 21   36     43   Transactions   32,000 –   21,000     84,000   Department direct costs   360,000 140,000 $ 935,000   $ 3,730,000                       Required: a. Allocate the cost of the service departments to the operating departments using the direct method. b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration. c. Allocate the cost of the service departments to the operating departments using the reciprocal method.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.

 

    Administration Accounting   domestic     International  
Employees   21   36     43  
Transactions   32,000   21,000     84,000  
Department direct costs   360,000 140,000 $ 935,000   $ 3,730,000  
                   


Required:

a. Allocate the cost of the service departments to the operating departments using the direct method.
b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.
c. Allocate the cost of the service departments to the operating departments using the reciprocal method.

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